Expanding Tax Objects and the Willingness to Understand the People's Socio-Economic Facts

The progressivity of tax politics will be counterproductive if it is not honest about the socio-economic realities of society. Expanding tax objects will contribute to an increase in the number of poor citizens if implemented amidst poor socio-economic conditions, as is currently the case. Instead of ‘taxing everything’, the public should be given incentives to enable everyone to rise and become self-reliant.

President Prabowo Subianto began his administration by providing incentives to micro, small, and medium enterprise (MSME) communities, as well as farmers and fishermen. To refresh our memory, by issuing and enforcing Government Regulation (PP) No. 47/2024, the President wrote off bad debts belonging to MSME players, farmers, and fishermen. This debt write-off incentive policy targeted one million debtors with a total debt value of Rp14 trillion.

The President implemented this debt write-off incentive when millions of MSME units were facing a wave of bankruptcy. Data from the Ministry of Cooperatives and SMEs once stated that in 2021, the number of MSME players reached 64.2 million units with a large labour absorption capacity. Today, the face of Indonesian MSMEs is very concerning. In fact, the MSME Association once revealed that around 30 million MSME business units have gone bankrupt.

MSME growth in recent years has been unclear. However, several studies have found that MSME credit growth since early 2026 has been quite alarming. The weakening absorption of MSME credit explains that the small and medium business community is not yet motivated to restart their businesses because they see market demand as sluggish.

The President’s initiative to provide such incentives should ideally continue with other steps relevant to efforts to restore the performance of the national business world, including efforts to revive the potential strength of MSMEs. Unfortunately, instead of creating other forms of incentives for recovery, all elements of the national business world are instead confronted with the progressivity or expansion of tax objects.

In recent days, the public sphere has been abuzz with objections or protests about the imposition of tax on every disbursement of the BPJS Employment old-age security (JHT) fund. JHT disbursements are burdened with Income Tax (PPh) Article 21 rates. This provision has caused the phrase ‘everything is taxed’ to echo again in the conversations of millions of people. This includes conversations within worker communities and private sector retirees who are asking for the JHT tax provision to be abolished.

The optimisation of regional tax potential set by several regional governments has also not escaped the spotlight of local communities. A young woman running an MSME went viral on social media for criticising and expressing her objection to a regional regulation (Perda) concerning the imposition of tax on small food stall businesses.

The Perda stipulates that culinary businesses with a turnover of Rp15 million will be subject to a 10 percent tax. The designers of such tax regulations are considered unrealistic, as they do not account for labour costs, fluctuations in food and vegetable prices, or the business owner’s need for space and time to strengthen capital, either by saving or setting aside profits.

Exactly one year ago, the public sphere was also coloured by a wave of protests when several communities reacted to or responded to the provisions regarding tax for e-commerce collected under Income Tax (PPh) Article 22. At that time, netizens flocked to the finance minister’s Instagram after the designation of e-commerce platforms as PPh Article 22 collectors.

This provision applies to goods sales transactions by merchants (individuals or entities) through the Electronic Trading System (PMSE) mechanism. In early July 2026, the Directorate General of Taxes (DJP) appointed four marketplaces to carry out the collection of PPh Article 22.

It is reasonable to say that the government’s efforts to expand the tax base in recent years appear very progressive. Perhaps this is due to the desire to pursue the tax ratio target. Various circles even see that many aspects of communal life are now almost subject to tax collection, from consumption, transportation, and education to health and digital activities.

Of course, the effort to expand the tax base is not wrong. Business and trade patterns that have changed and continue to evolve must be responded to with new policies, including approaches from the taxation aspect. However, regulators are also urged to be wise and honest in understanding the current socio-economic facts of society. The weak performance of the national economy has a direct impact on the dynamics of life for all elements of society.

Currently, the unemployment bubble continues to grow because the wave of layoffs cannot be stopped. This year alone, up to June 2026, no fewer than 43,000 cases of layoffs have been recorded. The increasing number of unemployed people causes demand for goods and services to decline. With limited income, millions of families are now only focused on securing basic needs and their children’s education. With such a factual picture, the potential tax that can be collected from the public automatically decreases.

Although the effort to expand the tax base is not wrong, this expansion should not be forced. Expanding tax objects will contribute to an increase in the number of poor citizens if implemented amidst socio-economic conditions that are not doing well, as is the case now. It would be very wise if regulators cared and empathised with the socio-economic realities of the people. If the expansion of tax objects and its enforcement is forced, the result will certainly be negative excesses.

If a retiree’s savings as JHT are also subject to tax deductions, it will certainly affect their ability to survive in old age. Small-scale food stall businesses should ideally be given room to grow through opportunities to strengthen capital from setting aside profits. If stall owners are burdened with tax obligations that are considered too large, the result will be counterproductive to the government’s own efforts to reduce poverty.