Politics · Indonesia · 13 hrs ago

Labor groups propose raising Indonesia’s tax-free income limit to Rp7.5 million

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.

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What people are saying

Said IqbalKSPI and Labor Party president
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.
via CNN Indonesia
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.
via CNN Indonesia
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.
via CNN Indonesia