Politics · Indonesia · 13 hrs ago
Labor groups propose raising Indonesia’s tax-free income limit to Rp7.5 million
Indonesia’s KSPI and Labor Party proposed raising the tax-free income limit to Rp7.5 million a month for workers.
The current limit is Rp4.5 million, and the proposal would exempt income up to the higher amount from personal income tax.
KSPI leader Said Iqbal says the current threshold no longer matches minimum wages, which are about Rp5.9 million in Karawang and Bekasi and Rp5.8 million in Jakarta.
Under the current rules, overtime, bonuses or holiday payments can push a worker’s income above the limit and make some income taxable.
The groups say a higher limit would ease workers’ tax burden and support their buying power as prices rise faster than wages.
Iqbal argues that workers might spend more of the money they keep, potentially increasing value-added tax revenue even as income-tax receipts fall.
The government is still studying the change, including its effect on state revenue, and officials have said it is under discussion for a 2027 government program.
Indonesia’s labor groups have proposed raising the tax-free income limit to Rp7.5 million per month.
The proposal would exempt workers earning up to that amount from income tax under Article 21.
KSPI and Labor Party president Said Iqbal said the current Rp4.5 million limit does not reflect minimum-wage levels.
He argued that a higher limit would protect workers’ take-home income when they receive overtime pay, bonuses or holiday allowances.
Government officials have said the proposal remains under review, including its effects on state revenue.
- Who
- The Confederation of Indonesian Trade Unions (KSPI) and the Labor Party, led by Said Iqbal.
- What
- They proposed raising the monthly tax-free income limit to Rp7.5 million.
- When
- The proposal was announced on November 3, 2026.
- Where
- Indonesia. Said made the announcement at an online news conference.
- Why
- They say the current Rp4.5 million limit no longer reflects minimum wages and that a higher limit could ease workers’ tax burden and support purchasing power.
This story does not have two clearly opposing sides.
Coordinating Economy Minister Airlangga Hartarto said a possible increase to the tax-free income limit was being discussed for a government program in 2027.
KSPI and the Labor Party proposed raising the monthly tax-free income limit to Rp7.5 million.
Finance officials said the policy was still being considered, including its effects on state revenue.
- Current tax-free income limit
- Rp4.5 million per month
- Proposed tax-free income limit
- Rp7.5 million per month
- Karawang and Bekasi minimum wages
- Around Rp5.9 million
- Jakarta minimum wage
- Around Rp5.8 million
- Tax on the example overtime income
- 5 percent on the Rp50,000 above the Rp4.5 million limit
What people are saying
Our proposal is for the tax-free income limit to be Rp7.5 million. At the very least, it should match the highest current minimum wage, around Rp5.9 million in Karawang and Bekasi. So minimum wages anywhere in Indonesia would not be taxed.
If a worker earns Rp4.5 million a month, they are not taxed. But as soon as they work a little overtime, say they get Rp50,000, their income becomes Rp4.55 million. That Rp50,000 difference is taxed at 5 percent.
Income tax under Article 21 will indeed bring in less revenue if the tax-free limit rises. But VAT will rise because that Rp1.4 million will be spent. In other words, it goes out of one pocket and into the other.