DGT Evaluates PPh 21, Mitigates DHE Risk Amidst 8% Target

This period is marked by the strengthening of domestic taxation oversight and macro policy steps focused on accelerating economic growth. The Directorate General of Taxes (DGT) tightens its supervision of business splitting practices to avoid the 0.5% Final Income Tax (PPh) for MSMEs, while also preparing an evaluation of the Average Effective Rate scheme for PPh 21. Meanwhile, President Prabowo accelerates the execution of 236 National Strategic Projects (PSN) to pursue the 8% economic growth target, amidst warnings from business actors that the revision of the Export Proceeds Foreign Exchange (DHE) policy must be handled carefully so as not to impose an undue Business Burden.

The government is aggressively targeting high growth through investment, supported by the enforcement of tax regulations. President Prabowo accelerates 236 National Strategic Projects (PSN). This acceleration is carried out in pursuit of the 8% Economic Growth target, indicating that infrastructure investment remains the main engine of future growth. To curb potential domestic revenue leakage, the Directorate General of Taxes (DGT) monitors business splitting practices that aim to enjoy the 0.5% Final PPh for MSMEs rate. Furthermore, the DGT will evaluate the Average Effective Rate scheme for PPh 21 at the end of this year, aiming to simplify employee tax reporting.

However, the fiscal and monetary enforcement efforts must be balanced with caution so as not to impose a Business Burden. Business actors warn that the 100% revision of the Export Proceeds Foreign Exchange (DHE) for Natural Resources (SDA) regulations must not increase the Business Burden. This warning emphasizes the necessity for government prudence so that the monetary policy, which aims to stabilize the Rupiah, does not actually hinder the competitiveness of exporters.

In the industrial sector, tax regulation challenges are impeding downstreaming. Finance Minister Purbaya receives a complaint from the jewelry producers association who request a change in the gold tax. This complaint shows the existence of fiscal barriers in the gold downstreaming industry, demanding a policy response that supports the growth of labor-intensive and export-oriented industries.

The DGT's focus on monitoring business splitting and evaluating PPh 21 shows the government's strong efforts to close potential domestic revenue leakages. President Prabowo's ambition to pursue 8% Economic Growth through the acceleration of 236 PSN serves as an indicator of policy priorities. However, this major policy must be accompanied by caution, especially in revising the DHE SDA regulations, as warned by business actors, so as not to increase the Business Burden. Meanwhile, the jewelry association's complaint highlights the need for tax regulation adjustments that are more favorable to the downstreaming industry.

The current situation shows a necessary balance to be maintained between the government's ambition to drive 8% Economic Growth through PSN acceleration and efforts to strengthen domestic taxation administration, including monitoring business splitting and evaluating the PPh 21 scheme. The effectiveness of the policy related to Export Proceeds Foreign Exchange (DHE) from natural resources will depend on the ability of the regulation revision to maintain stability without pressuring the export sector. Furthermore, the government's stance on the gold tax issue will be an indicator of its seriousness in promoting downstreaming in the non-commodity sector.