Economy-Wide Impacts of Airfare VAT Incentives in Indonesia: A Social Accounting Matrix Approach
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VAT Incentive, Airfare, GDP, Path Analysis, SAM
Abstract
Research Originality – Unlike previous studies relied on regression techniques, which are limited to capture the direct and indirect impacts across the entire economy, this study using the Social Accounting Matrix (SAM) in conjunction with Path Analysis approach to provide a more comprehensive analysis of the Government-borne VAT incentive on domestic airfare prices to captures economic-wide impacts on Wages, Gross Operating Surplus (GOS), Tax Revenue, and Gross Domestic Product (GDP).
Research Objectives This study aimed to evaluate the economic impact of the Government-borne VAT incentive on domestic airfare prices during the 2025 Eid al-Fitr period, particularly regarding effects on Wages, GOS, Tax Revenue, and GDP.
Research Methods – The SAM and Path Analysis were adopted to assess the impact of Government-borne VAT incentive on domestic airfare prices on Wages, GOS, Tax Revenue, and GDP.
Empirical Results – The findings showed that the policy increases Indonesia’s GDP by approximately 0.27%–0.29%. Furthermore, Wages are projected to rise by 0.26%–0.28%, GOS by 0.29%–0.31%, and net Tax Revenues by 0.12%–0.13%, reflecting positive impacts across multiple economic indicators.
Implications – The results implied that the policy increased mobility during the Eid al-Fitr period and contributed positively to Indonesia’s 2025 economic growth. For the Government, the policy could be extended to other major holidays, such as Eid al-Adha and Christmas, as well as implemented during periods of economic slowdown to support overall economic activity
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