The Influence of Value Added Tax (Vat) Assessment on Income Distribution of Consumer of Garment in West Java

Act No. 18 of 2000 regarding burden of Value Added Tax is bore by the consumer, but the implementation indicates that there is industrial policy to bear a part or an overall of VAT. Accordingly, if burden distribution is progressive, the higher household income means a higher VAT burden bore by the consumer, conversely, the lower consumer income, the lower VAT bore by him. Consequently, it will cut real income down, and it affects consumer’s purchasing power. Research objectives are to find out if distribution of industrial VAT burden is progressive, regressive or proportional, and to find out to what extend influence of VAT on distribution of household income. The influence of VAT on distribution of consumer’s household income will be tested by applying effective tariff, Gini index, and progressivity index. The findings indicate that effective tariff of VAT is progressive (positive value) meaning that consumer and industrial VAT burden is increasing. Calculation of Gini index before and after VAT assessment make consumer’s earning gaps smaller, while calculation of progressivity index indicates industrial tax system is progressive (positive value) indicating that most of consumers come from middle to upper class.