Indonesia’s retail sector faces challenges adapting to recent VAT policy changes amid ongoing recovery from the COVID-19 downturn. This study examines the relationship between the VAT rate increase—from 11% to 12% in April 2022—and consumer purchasing power, using a mixed-methods approach grounded in Islamic ethics. Conducted across five major Indonesian cities, the analysis reveals that the tax increase has spurred improvements in financial planning, with 78% of respondents reporting more structured shopping behavior. Consumer adaptation strategies—including digital tools and loyalty programs—resulted in 15–20% savings. Demand elasticity varied by product type: essential goods showed low elasticity (-0.3), while non-essentials exhibited higher elasticity (-1.2), reflecting consumer prioritization. The retail sector demonstrated resilience, growing from 3.2% to 4.2%, with operational efficiency rising from 82% to 88% and digital transformation reaching 87%. These findings offer empirical support for the positive effects of fiscal adjustments and highlight the role of Islamic ethics in promoting prudent, purposeful consumption.
Suhendar et al. (2023) studied this question.