DIGIVESTASI - The controversy surrounding the Value Added Tax on Self-Build Activities (VAT KMS) has intensified, especially regarding the plan to increase the rate from 2.2% to 2.4% in 2025. This increase is in line with the general VAT rate increase from 11% to 12%, but many parties have criticized this policy as unfair, especially for the middle and lower classes.

Achmad Nur Hidayat, an economist and public policy expert from UPN Veteran Jakarta, stated that the policy needs to be evaluated more deeply so that its implementation is truly effective and fair. According to him, the government's reason for implementing VAT KMS to create equality between people who build houses with contractors and those who build themselves is not appropriate, because the policy actually burdens people who are not the main target.

Achmad highlighted that tax indicators based on a minimum building area of 200 square meters do not always reflect luxury. In rural or suburban areas, houses of this size are often basic necessities, not luxury items. Therefore, he proposed that this policy should target luxury homes based on property value, not just building area.

In addition, Achmad criticized that the increase in the KMS VAT rate is inappropriate, as the government should be able to maximize the potential of other property taxes such as Land and Building Tax (PBB) and Sales Tax on Luxury Goods (PPnBM), which more effectively target the rich without burdening those who build their own homes.

Achmad also emphasized the need for the government to focus on the property sector by creating policies that encourage the development of public housing and increase the stock of subsidized houses. This is considered to be more fair and effective in helping people to own a house rather than applying additional taxes such as VAT KMS.

In a broader perspective, Indonesia's middle class, which was previously the main driver of economic growth, is now experiencing serious challenges. The decline in the size of the middle class in recent years is an important signal, although financial inclusion in Indonesia continues to increase, reaching 88.7% by 2023.

Achmad underlined that financial inclusion is not just about physical access, but also about active use of financial services. The middle class, especially outside Java, still faces challenges in accessing financial services, which prevents them from fully utilizing the potential of financial inclusion.

To address these challenges, the government needs to improve financial literacy, improve financial infrastructure in underdeveloped areas, and create pro-investment policies. In addition, education should be prioritized, as higher education contributes significantly to improved economic welfare.

Achmad emphasized that more progressive financial inclusion policies that focus on education and financial literacy will help Indonesia's middle class break out of stagnation and drive social mobility to higher levels.

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