DIGIVESTASI - Controversy over the implementation of Value Added Tax on Self-Build Activities (VAT KMS) has risen again, especially after the government announced a plan to increase the rate from 2.2% to 2.4% by 2025. This policy is in line with the general VAT rate increase from 11% to 12%, but has drawn criticism from various parties.

Achmad Nur Hidayat, an economist and public policy expert from UPN Veteran Jakarta, believes that the policy is not in line with the principle of justice. “The implementation of the KMS VAT needs to be evaluated in depth to make it more fair and effective,” he said, Thursday (19/9/2024).

One of the reasons the government implemented VAT KMS is to create equality between those who build their own homes and those who use contractor services. However, it is feared that this policy will burden the lower middle class, especially those who build their own homes due to budget constraints.

The criteria of a minimum building area of 200 square meters subject to tax may be considered a luxury, but in many areas, including rural areas, that size can be a basic need, not a luxury. Many large families or those with special needs require larger houses, so this policy is not well-targeted.

Achmad suggested that the government adjust the policy to focus more on luxury homes based on property value, not just building area. “Determining taxes based on the value of the house or property will be fairer, because it targets groups of people who are financially capable,” he explained.

In addition, he highlighted the importance of revamping the property sector as a whole, given that rising property prices have made it difficult for low-income people to own a house. According to him, instead of increasing taxes on people who build their own houses, the government should encourage the construction of public housing and increase the stock of subsidized houses.

Achmad also suggested that the government maximize revenue from other property tax instruments, such as Land and Building Tax (PBB) and Sales Tax on Luxury Goods (PPnBM), which can more effectively target the rich without burdening those who are building their first home.

The KMS VAT policy is considered to risk burdening the middle and lower classes, so the government needs to review its implementation to ensure fairness and effectiveness. “With more focused policies and expanded housing programs, the government can create tax justice without burdening people who are struggling to have decent housing,” Achmad concluded.