Indonesia is in a period of economic recovery after the COVID-19 pandemic. In 2022, the Government of Indonesia officially increased the value-added tax (VAT) rate from 10% to 11%. The increase in tax rate is by Law No. 7 of 2021 concerning Harmonization of Tax Regulations (HPP). This study aims to determine the background of the increase in the VAT rate to 11% in 2022 and its impact on the Indonesian economy. The research method used is the literature study by collecting and analyzing data and literature from various sources. The results of the study found that the background of the government in increasing the tax rate is: (1) to increase state revenue so that the state budget revenue target from the tax sector can be achieved, (2) to reduce the debt-to-GDP ratio, which reaches 40% during the pandemic, (3) improve health facilities and education facilities and strengthen national defense and security. The impact of the VAT increase on the economy is: (1) Peoples purchasing power decreases, (2) the distribution of goods is hampered, and the turnover of entrepreneurs decreases, (3) national income decreases, and the inflation rate increases. The government must provide subsidies or social assistance to increase peoples purchasing power and maintain Indonesias economic stability during the economic recovery.

economic stability

economic recovery

macroeconomic

VAT

VAT 11%