JAKARTA, DDTCNews \u2014 The ASEAN+3 Macroeconomic Research Office (AMRO)\nis urging Indonesia to improve the efficiency of its value-added tax\n(VAT) collection. Indonesia\u2019s VAT collection has been deemed inefficient\ndue to the high taxable entrepreneur (PKP) threshold and the large\nnumber of goods and services exempt from VAT.<\/p>\n
The inefficiency of VAT collection is reflected in Indonesia\u2019s low\nVAT C-efficiency ratio. \u201cVAT collection efficiency can be improved by\nlowering the PKP threshold and evaluating goods and services exempted\nfrom VAT,\u201d AMRO wrote in its Annual Consultation Report: Indonesia \u2014\n2025, as quoted on Monday (23\/6\/2025).<\/p>\n
Currently, the PKP threshold in Indonesia stands at Rp4.8 billion, or\napproximately US$315,000. By comparison, PKP thresholds in neighbouring\ncountries are set below US$55,000.<\/p>\n
The government established this threshold to ease the tax compliance\nburden and enhance the competitiveness of Indonesian micro, small and\nmedium enterprises (MSMEs). With a reduced compliance burden, MSMEs are\nexpected to continue growing and expanding.<\/p>\n
The problem, however, is that business operators deliberately keep\ntheir turnover below Rp4.8 billion per year to avoid the obligation of\nbeing registered as taxable entrepreneurs and collecting VAT. This\nbehaviour hampers economic growth and creates tax collection\ninefficiencies.<\/p>\n
According to AMRO\u2019s records, Indonesia is currently evaluating the\nexisting PKP threshold. \u201cThe government is considering expert\nrecommendations to lower the PKP threshold and is holding internal\ndiscussions on the matter,\u201d AMRO wrote.<\/p>\n
For context, taxpayers whose business turnover has not yet reached\nRp4.8 billion per year are entitled to utilise the MSME final income tax\nscheme at a rate of 0.5 per cent and are exempt from the obligation to\nbe registered as taxable entrepreneurs.<\/p>\n
Towards the end of last year, the government had planned to lower the\nthreshold from Rp4.8 billion to Rp3.6 billion. However, the Directorate\nGeneral of Taxes (DJP) subsequently denied the plan. \u201cTo date, the\ngovernment has no plans to lower the turnover threshold for\nentrepreneurs using the 0.5 per cent income tax rate, nor the threshold\nfor PKP registration, from Rp4.8 billion per year to Rp3.6 billion per\nyear,\u201d DJP stated in an official statement released in December\n2024.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/amro-urges-indonesia-to-improve-vat-collection-efficiency-1771249213", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }