Indonesia’s internet users may face higher costs in 2025 as sea cable providers adjust their rates in response to a 12% Value-Added Tax (VAT). Scheduled to take effect on January 1, this policy shift is expected to impact internet tariffs significantly, raising concerns about its effects on the nation’s digital transformation and economic growth.

Submarine cable systems (SKKL), vital for internet connectivity, form the backbone of digital infrastructure. Before reaching consumers as mobile or fixed broadband, internet data relies on these undersea cables. According to ICT Institute Executive Director Heru Sutadi, SKKL systems are crucial for Indonesia’s economic growth, especially in regions dependent on digital access.

"The economy's progress begins with reliable submarine cable infrastructure," Heru stated. However, he warned that higher SKKL tariffs could hinder the government's ambitious goal of achieving 8% economic growth. Heru also criticized the VAT hike, arguing that internet infrastructure should not fall under luxury goods taxation.

Ian Yosef M. Edward, Chair of ITB’s Center for Telecommunications Policy Studies, expressed similar concerns. He noted that increased costs for operational (opex) and capital expenditures (capex) in the SKKL sector could destabilize business dynamics, potentially slowing digital transformation. To mitigate these effects, Ian urged the government to offer incentives to SKKL operators to keep prices competitive.

Resi Y. Bramani, Secretary General of Indonesia’s Sea Cable Association (Askalsi), highlighted the domino effect of rising taxes. “When VAT increased to 11%, operators absorbed the costs to shield consumers. However, with the shift to 12%, the burden will inevitably pass on,” Resi explained. He added that operational costs and deployment expenses for new cables would rise, necessitating adjustments in service pricing.

The VAT increase is part of the government’s broader tax reform under Law No. 7/2021 on Tax Harmonization. While aimed at boosting state revenue, this policy is already sparking debates about its potential to strain businesses and consumers alike.

BISNIS