Politics · Singapore Bureau
Indonesia to raise tax-free income threshold for first time since 2016
Indonesia's government is planning its first adjustment to the personal income tax exemption threshold in nearly a decade, signalling a potential shift in the country's tax policy. The move comes as Jakarta seeks to balance revenue needs with cost-of-living pressures facing workers.
LSN Singapore ·
Indonesia is set to revise its tax-free income threshold, which has remained static at 54 million rupiah (approximately S$3,800) annually since 2016, according to a government minister. The planned adjustment marks the first modification to the personal income tax exemption level in eight years, reflecting changing economic conditions in Southeast Asia's largest economy.
The current threshold means workers earning 54 million rupiah or less annually pay no income tax. As inflation and wage growth have outpaced the fixed threshold, an increasing proportion of workers' income has become subject to taxation despite minimal real wage gains, prompting calls for an adjustment.
The government has not yet disclosed the proposed new threshold level or implementation timeline. Tax policy adjustments in Indonesia typically undergo parliamentary review before being enacted, suggesting any changes are unlikely to take effect immediately.
The planned revision reflects broader policy discussions in Jakarta about balancing fiscal needs with household purchasing power during a period of economic uncertainty. Economists have noted that updating tax brackets regularly can help maintain the real value of tax exemptions as inflation erodes earning capacity.