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Fiscal Dynamics: Rejection of Tax Amnesty, Excise Oversight, and Industry Challenges

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Fiscal Dynamics: Rejection of Tax Amnesty, Excise Oversight, and Industry Challenges
Indonesia’s economic and fiscal landscape continues to evolve, shaped by a series of policy decisions that set new directions for the market. Public attention is focused on several key issues, ranging from fiscal discipline and excise monitoring to the effectiveness of tax incentives and the challenges facing domestic industries.


The government, under the leadership of Finance Minister Purbaya Yudhi Sadewa, has demonstrated a firm commitment to fiscal compliance by rejecting the proposed third round of the Tax Amnesty program. Purbaya argued that repeating such programs would create negative incentives and encourage tax avoidance practices. In line with stricter enforcement, Customs has intensified monitoring of cigarette prices in the market to curb the circulation of illegal tobacco products. The Finance Minister also pledged tough action against customs officials involved in smuggling or facilitating the sale of illicit cigarettes through e-commerce platforms and small shops. Meanwhile, the government has yet to decide whether tobacco excise rates for 2026 will increase or decrease, pending a comprehensive review balancing state revenue and public health considerations.


Despite these enforcement measures, the government faces ongoing challenges in ensuring the effectiveness of fiscal stimulus policies and in protecting domestic industries. The Article 21 Income Tax (PPh 21) borne by the government (DTP) incentive has been criticized by the Indonesian Footwear Association (Aprisindo), which argues that the policy has had little impact on workers or the footwear industry.
Adding to the pressure, the domestic textile sector is struggling against a surge in imports. Data shows that imports of used clothing continue to rise significantly, in stark contrast with stagnant local textile production. This surge is seen as a serious threat to the sustainability of domestic industries, which are already burdened by high operational costs.


These developments highlight the strong interlinkages between fiscal and monetary policies. While Bank Indonesia’s recent rate cut reflects a stimulus-oriented approach to drive economic growth—reinforced by the prospect of foreign capital inflows—the fiscal front remains more complex. The projected increase in the 2026 state budget deficit signals growing expenditure needs, requiring effective revenue strategies. Meanwhile, debates over inheritance tax proposals and concerns about loopholes in the MSME final tax scheme further emphasize the need for well-calibrated, fair, and effective tax policies that safeguard revenue without triggering social backlash.


Overall, these dynamics underscore the complexity of managing Indonesia’s national economy. While monetary policy sends a positive signal, fiscal pressures remain significant. The government must strike a careful balance between rising state spending, strengthening tax revenues, and implementing policies that minimize opportunities for tax avoidance. Ultimately, the government’s success will depend on its ability to integrate responsive policies that address global economic shifts while remaining grounded in fairness and effectiveness at home.



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