Business · Economy · 1 day ago
Indonesia Studies Raising Income Tax-Free Threshold
Indonesia's Finance Ministry is studying whether to raise the income tax-free threshold for individual taxpayers.
The current limit is Rp54 million a year, or Rp4.5 million a month, and has been unchanged since 2016.
The proposal is being discussed as a possible tax incentive for 2027, but the review is not finished.
Coordinating Economic Affairs Minister Airlangga Hartarto has said any new limit would not start in January 2027, and could take effect later.
Officials say they are weighing the benefits to workers against the effect on government revenue.
Tax chief Bimo Wijayanto says the current threshold is already high compared with income and poverty measures, while Finance Ministry officials say the revenue impact depends on taxpayers' income brackets.
The government has not set a new threshold or start date.
Indonesia’s Finance Ministry is studying whether to raise the annual personal income tax-free threshold, currently Rp54 million.
The ministry says it is weighing the effects on the economy, state revenue and the public.
Economic Affairs Minister Airlangga Hartarto has said the threshold would be adjusted in line with inflation, with a change discussed for 2027.
Tax Director General Bimo Wijayanto says Indonesia’s threshold is relatively high compared with poverty and income measures, and its effects would differ across income brackets.
Airlangga said a new threshold would not take effect in January 2027 because discussions are unfinished.
- Who
- Indonesia’s Finance Ministry is studying the threshold; Economic Affairs Minister Airlangga Hartarto has raised the proposal.
- What
- The government is considering raising the personal income tax-free threshold, currently Rp54 million per year.
- When
- The issue was discussed in 2026, with a possible change in 2027. Airlangga said it would not take effect in January 2027.
- Where
- Indonesia.
- Why
- Airlangga said an adjustment would be linked to inflation and could exempt minimum-wage workers from income tax. The ministry is also weighing effects on state revenue and the economy.
Economic Affairs Ministry proposal
Finance Ministry tax officials
Purpose
Economic Affairs Ministry proposal
Airlangga Hartarto said the threshold would be adjusted in line with inflation and that raising it is intended to exempt minimum-wage workers from income tax.
Finance Ministry tax officials
Bimo Wijayanto said the current threshold is already relatively high compared with poverty and income measures, and that an adjustment would affect state revenue.
Airlangga Hartarto raised adjusting the non-taxable income threshold in line with inflation after a meeting with President Prabowo Subianto.
Deputy Finance Minister Juda Agung said the optimal threshold was being studied, while Bimo Wijayanto discussed how an adjustment could affect revenue across income brackets.
The Finance Ministry said it was discussing the proposal in more detail, and Bimo said the current threshold was relatively high.
Airlangga said a new threshold could apply after January, once discussions are finished.
- Current annual tax-free threshold
- Rp54 million
- Current monthly tax-free threshold
- Rp4.5 million
- Current threshold last increased
- 2016
- PPh 21 revenue by end of August 2026
- Rp171.5 trillion
- Individual personal income tax revenue by end of August 2026
- Rp18.2 trillion
3 sources
What people are saying
The discussion has not finished; it will not be implemented in January, perhaps we will do it after January.
If it's 5 percent, it's still very low.
Among OECD and G20 countries, Indonesia is among those that relatively apply a high PTKP. Around 67% of GDP per capita. Then 7 times the poverty line. So, interpret this academically as you wish.