Why Hospitality Sector is Alarmed By Indonesia’s New Tax Policy & Impact on the Travel Sector
Indonesia’s planned VAT hike to 12% in 2025, coupled with a 50% cut in government travel budgets, threatens hotel earnings, consumer spending, and jobs.
The Indonesian Hotel and Restaurant Association (IHRA) has voiced strong concerns over the government’s decision to increase the value-added tax (VAT) from 11% to 12% starting January 1, 2025. The association warned that this move could weaken consumer purchasing power and significantly impact business revenues. As a result, many operators in the hospitality sector may be forced to reduce their workforce to sustain operations.
This planned tax adjustment is part of the government’s strategy to enhance state revenue. However, industry players believe the timing is less than ideal, as the hospitality sector is already grappling with declining consumer spending. The additional financial burden on customers could further strain businesses, making it harder for them to recover from previous economic challenges.
IHRA has called on the government to reconsider the implementation of the tax hike.