MSME Tax Overhaul May Slow Expansion, Hiring: Economists<\/p>\n
Jakarta. Economists have warned that the government\u2019s decision to\nnarrow eligibility for the 0.5% final income tax regime for micro,\nsmall, and medium enterprises (MSMEs) could raise operating costs for\nthousands of small businesses structured as limited partnerships (CV)\nand limited liability companies (PT), potentially affecting expansion\nplans and job creation.<\/p>\n
Under Government Regulation (PP) No.\u00a020\/2026, the government has\nretained the 0.5% final income tax rate for MSMEs but restricted access\nto the facility. CVs, firms, non-individual PTs, and village-owned\nenterprises (BUMDes) are no longer eligible for the preferential tax\nscheme.<\/p>\n
Head of Research at the Center for Indonesia Taxation Analysis Fajry\nAkbar said the policy is intended to curb the practice of firm\nsplitting, in which larger businesses divide operations into smaller\nentities to qualify for MSME tax incentives. However, he cautioned that\nthe regulation could also affect genuinely small businesses that happen\nto operate as CVs or conventional PTs.<\/p>\n
\u201cSmall businesses that operate as CVs or regular PTs will be affected\nby the new tax policy, even though they are not using firm-splitting\nschemes,\u201d Fajry said.<\/p>\n
Businesses that lose access to the 0.5% final tax regime will have to\ntransition to the general tax system, which requires formal bookkeeping\nand financial reporting. Fajry said that this could significantly\nincrease compliance costs, particularly for small enterprises with\nlimited administrative capacity.<\/p>\n
\u201cIf the burden becomes disproportionate, it could ultimately affect\nthe sustainability of MSMEs,\u201d he said.<\/p>\n
Fajry added that the timing of the policy warrants careful\nconsideration, as businesses are already grappling with slower economic\ngrowth and elevated global uncertainty.<\/p>\n
While the tax rate itself remains unchanged, businesses previously\nbenefiting from the final tax regime could face higher effective tax\nobligations under the new system.<\/p>\n
\u201cAn increase in the tax burden under current conditions will\nundoubtedly weigh on businesses. Whenever taxes rise, companies will\nhave to recalculate their plans,\u201d he said.<\/p>\n
Higher costs could discourage business expansion, prompting firms to\ndelay investment and hiring. \u201cIf the expected return is no longer\nattractive, businesses will hold back, and one consequence could be\nslower job creation,\u201d Fajry said.<\/p>\n
A similar concern was raised by Nailul Huda, Director of Digital\nEconomy at the Center of Economic and Law Studies (Celios). He argued\nthat the regulation could create unintended consequences.<\/p>\n
\u201cI think many businesses will eventually split into individual PTs by\ndividing their operations, as they have done before. This could make\nbusiness data even more difficult to track,\u201d Huda said.<\/p>\n
The government has said the policy aims to ensure tax incentives are\nbetter targeted and to prevent misuse by larger businesses that\nartificially divide their operations into multiple smaller entities.<\/p>\n
Under the new regulation, the 0.5% final income tax remains available\nto eligible MSMEs with annual revenue of up to Rp 4.8 billion, while the\nfirst Rp 500 million in annual revenue earned by individual taxpayers\nremains exempt from income tax.<\/p>\n
The Directorate General of Taxes said individual taxpayers and\nindividual PTs may continue using the 0.5% tax scheme indefinitely,\nwhile cooperatives can access the facility for four years after\nregistration. The policy is intended to better target tax incentives and\nprevent abuse through practices such as firm splitting.<\/p>\n
Businesses such as PTs and CVs that transition out of the final tax\nregime will instead be taxed based on net profit after deducting\noperational expenses rather than gross revenue. The government has also\npledged a transition period and assistance to help affected businesses\nadapt.<\/p>\n
\u201cThe government wants to be present not only as a regulator but also\nas a partner accompanying businesses throughout their journey. We want\nto ensure our MSMEs transform into stronger, more independent, and more\ncompetitive enterprises,\u201d Director General of Taxes Bimo Wijayanto\nsaid.<\/p>\n
Tags: Keywords:<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/msme-tax-overhaul-may-slow-expansion-hiring-economists-1781275807", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }