Hello reader,

Here’s some gloomy news to start the week: Indonesia’s much-panned VAT hike is definitely happening in 2025.

It’s not a popular policy by any means, and the government has been attempting to cushion the blow by promising exemptions and subsidies elsewhere. Would they be enough to halt an economic decline many fear is inevitable?

Read on for more on the topic.

Cheers,

Andra

Law/Politics

• It’s official — the Indonesian Democratic Party of Struggle (PDI-P) have formally dismissed former President Joko Widodo, his son and Vice President Gibran Rakabuming, and his son-on-law and North Sumatra Governor-elect Bobby Nasution from the party. Their termination notices said Jokowi and his sons were no longer politically aligned with PDI-P, particularly as they disregarded party instructions in the last presidential election in order to join forces with rival Prabowo Subianto, who, of course, became Indonesia’s president earlier this year.

• The 35-year-old son of a bakery chain owner in Cakung, East Jakarta has been arrested for allegedly assaulting an employee. The incident reportedly occurred in late October, but the suspect was only arrested after video of the assault went hugely viral this weekend. According to reports, the suspect threw a chair at the victim after she refused to bring his food to his room, which was not part of her job description. Police said investigation into the case was slow due to delays in questioning, particularly of the victim, who suffered physical as well as psychological trauma from the assault.

• The five remaining members of the Bali Nine group, involved in a drug trafficking case that strained Indonesia-Australia relations, have returned to Australia after President Prabowo decided to send them home on humanitarian grounds. Though there’s barely any reported backlash about the transfer in Indonesia, the two countries had to reach a practical agreement to facilitate the move as there is no law for prisoner transfers between them.

• Another beneficiary of Prabowo’s reported compassion is Philippine national Mary Jane Veloso, who is leaving Indonesia in the early hours of Tuesday. Veloso has spent over a decadeon Indonesia’s death row for drug smuggling and was about to be executed by a firing squad before former President Joko Widodo granted a last-minute temporary reprieve in 2015. Her release follows years of diplomatic negotiations and advocacy from human rights groups, who argue she was a victim of trafficking.

• A husband, wife, and their three-year-old child were found dead in South Tangerang, Banten allegedly due to financial pressures stemming from online loans. The man reportedly took his own life after killing his family. This tragedy highlights the pervasive issue of predatory online lending platforms in Indonesia, which trap borrowers in cycles of unmanageable debt, often leading to mental health crises and extreme outcomes. 

Business/Economy

• It’s official — President Prabowo’s administration will raise the country’s VAT (PPN) rate from 11% to 12% starting January 1, 2025, aiming to boost government revenue for President Prabowo’s critical programs, including the free meals program. To cushion the anticipated blow to the public’s purchasing power, the government said it will provide subsidies to stimulate the economy, such as by giving limited-time discounts on prepaid electricity tokens for low electrical power households; extension of housing tax incentives; extension of tax cuts and breaks for SMEs; tax cuts on hybrid vehicles as well as electric vehicles; and more. Crucially, staple goods and services are exempt from VAT, including staple foods like rice and chicken; public healthcare and education; financial services and insurance; water and electricity.

• Finance Minister Sri Mulyani said corporate tax revenues plunged by 23% year-on-year in November as global commodity prices normalized after record highs. The government collected IDR 289 trillion from corporations in 2024 up to November 30, accounting for 17% of the country’s tax revenue, behind only VAT at over 25%.

• Housing and Settlements Minister Maruarar Sirait says his ministry is seeking financial support from the World Bank in order to fund the administration’s ambitious target of building 3 million new homes annually. Maruarar said the current allocation from the state budget (APBN) is only enough to construct 257 thousand homes.

Everything Else

• Indonesia whimpered to a 1-0 defeat to Vietnam in their third group stage match of the ASEAN Football Federation (AFF) Championship, having been on the back foot for most of the match. The result leaves Indonesia with four points after three matches, with one group stage match against the Philippines remaining on December 21. Indonesia, currently second in the group of five nations, must finish in the top two to qualify to the competition’s playoffs.