Director General of Taxes Explains Tax Allowances for Private Sector
Director General of Taxes Bimo Wijayanto said that tax allowances can also be enjoyed by the private sector. He made the remark after a heated debate on the tax treatment of the Hari Raya Allowance (THR) for Civil Servants, the Indonesian Military (TNI), and the Indonesian Police (Polri), which can be tax-free while private-sector employees are taxed.
‘The issue that is currently making waves in the media, regarding why the government bears only PPh (income tax) Article 21 for ASN, TNI and Polri, I can say that in the private sector there is also a tax allowance facility,’ Bimo said at a media briefing in Jakarta on Thursday, 5 March 2026.
Bimo explained that the private-sector tax allowance is provided in a different way. ‘The tax borne by the employer can be deducted as deductible expenses,’ he said.
Citing an official explanation on the Directorate General of Taxes’ Instagram account, employees can enjoy the THR in full if the company has a policy to bear PPh Article 21 for employees using a gross-up or tax allowance scheme. Bearing PPh 21 will raise the company’s costs, but such costs can reduce gross income (deductible).
Earlier there was wide online discussion about the inequality of THR tax deductions. Netizens questioned why there is a tax deduction for THR for civil servants while THR for private-sector workers is taxed.
Tax collected on THR falls under PPh Article 21. THR for ASN, TNI and Polri is tax-free because it is borne by the government, referring to Finance Minister Regulation (PMK) No. 105 of 2025. For non-ASN workers, the calculation of THR tax deductions refers to the average effective rate mechanism (TER).
Senior Advisor to the Finance Minister for Tax Compliance, Yon Arsal, stated that there is no additional tax imposed on THR. It is just that, before this rule was applied, the tax burden piled up at year-end. Now it is distributed across almost every month, so it feels larger. Under this scheme, the December tax burden will not pile up.
Editor’s Pick: How Big an Impact Does ASN THR Have on Economic Growth