6 Alternative Strategies to Deal with the 12% VAT Increase for Culinary Businesses

Are you ready for the upcoming 12% Value Added Tax (VAT) increase in your culinary business?

This increase is expected to take effect starting January 1, 2025, and will bring significant changes to your business operations.

In this article, we will discuss several important strategies you can apply to navigate the 12% VAT hike and ensure your culinary business continues to thrive.

VAT Increase (12%)

The 12% VAT increase is stated in Law No. 7 of 2021 on the Harmonization of Tax Regulations (UU HPP) Article 7, Paragraph 1.

The purpose of this increase is to boost government revenue, as VAT is one of the main sources of state income. It plays a crucial role in funding government programs.

Another goal is to reduce foreign debt, as Indonesia still relies on borrowing to cover its budget deficit.

Lastly, the 12% VAT increase aims to align Indonesia's tax system with international standards.

This VAT hike will undoubtedly impact various sectors, especially the culinary business you are running.

If you're feeling uncertain about how to adjust your strategy in light of the tax increase, this article will help you plan accordingly.

Strategies to Overcome the 12% VAT Increase

Source: Freepik.com

Analyze Production Costs

The first step is to analyze your production costs.

The 12% VAT increase will raise production costs, so you need to find ways to save without compromising the quality of the products you're selling.

For example, you could use cheaper raw materials or look for more efficient suppliers.

Optimize Management Systems

With today's technological advancements, optimizing your culinary business's management system becomes much easier.

For instance, you can use ERP software from ESB Core to monitor financial performance and avoid accounting mistakes that could increase administrative costs.

Enhance Competitiveness

It would be best if you strengthened your competitiveness with other businesses in the culinary industry.

With the 12% VAT increase, the selling price of your products will naturally rise.

Therefore, you should enhance your competitiveness by offering promotions, discounts, or special menu packages.

For example:

- "Buy One, Get One Free" promotions

- Special discounts for loyal customers

- Offer special pricing on set menu packages

Consult with a Tax Expert

If you're struggling to design a strategy to face the 12% VAT increase, it’s a good idea to consult with a tax expert.

A tax expert can provide valuable advice and help you ensure you're compliant with the tax regulations.

When choosing a tax expert, make sure they have experience and solid knowledge of current tax laws.

Revise Your Pricing Strategy

Developing the right pricing strategy is crucial for your culinary business.

You can increase prices gradually so that customers aren’t shocked by the price hike.

Additionally, you can offer discounts on certain products to attract more customers.

Focus on Local Products

Local products are generally cheaper than imported ones.

Therefore, focus on using local raw materials for your products.

Not only will this reduce your tax burden, but it will also support the domestic industry.

The 12% VAT increase is challenging, but with the right strategies, your culinary business can continue growing despite the tax hike.

Make sure to stay updated on tax regulations and consult with tax experts when needed. With the right approach, your business will continue to thrive in the face of these changes.