PTKP Threshold Finally Raised After a Decade of Anticipation and Article 21 Income Tax DTP Expanded, Why Do Economists Still Urge VAT Cuts?

The government is currently studying adjustments to the Non-Taxable Income (PTKP) threshold, which could potentially be implemented in 2027. The Coordinating Minister for Economic Affairs stated that the government, together with the Ministry of Finance, is calculating the adjustment amount while considering inflation developments. Currently, the PTKP threshold for individual taxpayers remains at Rp54 million per year or Rp4.5 million per month, having been last adjusted in 2016.

Discussions regarding the PTKP adjustment are still ongoing, and the government has not yet announced the amount or the formula to be used in determining the new figure. The government is considering inflation developments as one of the bases for adjustment because the PTKP limit has remained at Rp54 million per year since 2016. If implemented in 2027, this change will affect the calculation of Article 21 Income Tax (PPh 21) as PTKP is a key component in determining Taxable Income (PKP).

The plan to revise PTKP in 2027 is also part of the directives from the President of the Republic of Indonesia. The government is still calculating the adjustment amount with the Ministry of Finance while taking inflation developments into account. This discourse has also drawn attention from labor groups, who proposed raising the non-taxable income limit to Rp7.5 million per month. However, this figure remains a proposal, and the government has yet to establish the new PTKP threshold that will apply in 2027.

In addition to the PTKP adjustment, the government is discussing the continuation of the Article 21 Income Tax reduction policy for workers earning below Rp10 million in 2027. This policy is planned to be expanded across all economic sectors. However, the Chief Economist of Bank Maybank Indonesia assessed that the PTKP adjustment and PPh 21 incentives are insufficient to boost public purchasing power, which continues to face pressure from rising living costs. As an additional measure, the economist proposed lowering the VAT rate from 11% to 8% to spur domestic consumption.

This series of discussions indicates that 2027 tax policy is directed toward safeguarding purchasing power through PTKP adjustments and the continuation of Article 21 Income Tax incentives, while the proposal to reduce the VAT rate to 8% serves as one of the alternatives discussed to stimulate domestic consumption. However, neither the new PTKP threshold nor the proposed VAT rate change has been fully enacted into policy. For business actors, these developments should be anticipated by monitoring government-established policies and conducting simulations of their impact on labor costs, selling prices, consumer demand, and cash flow before adjusting business strategies.