Evaluating the Impact of Value-Added Tax on Economic Growth, Inflation, Unemployment, and Consumer Behaviour in Developing Countries: Evidence from Indonesia
DOI:
https://doi.org/10.47747/icbem.v2i2.2615Abstract
Value-Added Tax (VAT) is a major source of government revenue in many developing countries, including Indonesia. This research aims to evaluate the impact of VAT on economic growth, inflation, unemployment, and consumer behavior in Indonesia. The study utilizes secondary data from 2000 to 2023, encompassing various economic indicators. The results of the analysis indicate a significant relationship between VAT policies and these indicators, though the outcomes vary depending on specific contexts. This research concludes that VAT policies require comprehensive evaluation to minimize negative impacts and maximize benefits. The study reveals a significant negative relationship between VAT rates and GDP growth, where each unit reduction in VAT rates corresponds to an increase in economic output. Similarly, higher VAT rates demonstrate a positive but limited effect on inflation, reflecting the pass-through effect of VAT on consumer prices. Additionally, a strong positive correlation emerges between VAT rates and unemployment, highlighting its potential to suppress labor market dynamics. Lastly, household consumption is highly responsive to VAT adjustments, underscoring its role as a critical factor. The study concludes that high VAT rates can hinder economic growth, exacerbate inflation, and increase unemployment in developing countries like Indonesia. It recommends policies emphasizing the optimization of VAT rates to balance revenue collection with sustainable economic expansion and socioeconomic stability. This research provides valuable insights for policymakers and contributes to the global discourse on tax policies and economic development.
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