Starting next year, there will be a significant shift in the education landscape in Indonesia. The government has decided to impose a 12% Value Added Tax (VAT) on certain educational institutions through fiscal policy. This policy specifically targets schools categorized as “premium” or “luxurious,” with criteria still in the finalization stage.

One key indicator used to determine which schools will be taxed is the label “international standard.” Schools claiming to have a curriculum, facilities, or certifications equivalent to those abroad are the main targets. Additionally, the amount of annual tuition fees is also a crucial consideration. Schools with fees above Rp100 million per year are likely to fall into the taxable category.

The government argues that this policy is based on principles of fairness and mutual cooperation. Luxurious schools, typically catering to the elite, are deemed to have greater financial capacity to contribute to national development. In other words, those able to afford high education costs are expected to also contribute to the public sector through taxes.

While the noble intention of this policy is clear, its implementation could potentially lead to various negative impacts. The significant increase in education costs due to the addition of VAT could be an additional burden for parents, especially those from middle to lower-class backgrounds. This could reduce their access to quality education, widen educational disparities, and force families to choose more affordable yet potentially lower-quality schools.

Moreover, high tax burdens could hinder the growth of new educational institutions. Investors might be reluctant to invest in the education sector due to increased financial uncertainty and risks. Consequently, the options for quality schools become more limited.

Furthermore, focusing on tax obligations could divert the attention of educational institutions from efforts to improve educational quality. Schools may prioritize cost efficiency over pedagogical innovation. This could impact the quality of student learning and reduce the competitiveness of graduates in the global arena.

The implementation of this policy needs to consider several important factors. Firstly, the definition of “luxurious schools” must be clear and objective to avoid discrimination. Secondly, the government needs to ensure that tax revenues from the education sector are used effectively and transparently to enhance overall education quality. Thirdly, there should be mechanisms in place to protect students from less privileged families to ensure they still have access to quality education.

Imposing VAT on educational institutions is a complex step with broad potential impacts. On one hand, this policy could enhance fairness in the tax system. However, on the other hand, it could hinder public access to quality education and widen social disparities. Therefore, a more in-depth study involving various stakeholders is necessary to find an optimal solution.