On IMF's Proposal to Raise Income Tax, Purbaya: No Tax Rate Changes Before Economy Strengthens

Jakarta, VIVA – Finance Minister Purbaya Yudhi Sadewa has affirmed that he will not alter tax rates in the near term until the Indonesian economy has strengthened.

He made the statement in response to a simulation by the International Monetary Fund (IMF) that included a gradual increase in employee income tax (PPh 21) as one of several financing alternatives to bolster public investment.

“Before the economy is strong, we will not tinker with tax rates. Instead, we will pursue extensification, plug tax leakages, and so forth,” Purbaya said at the House of Representatives in Senayan, Jakarta, on Wednesday, 18 February 2026.

Rather than raising rates, Purbaya said he intends to focus on broadening the tax base, improving compliance, and accelerating economic growth in order to keep the deficit under control without adding to taxpayers’ burden in the near term.

“What I want to ensure is that the economy grows faster so that my tax revenue is higher. That way, the 3 per cent threshold can be avoided automatically,” he said.

In its report entitled “Golden Vision 2045: Making The Most Out of Public Investment”, the IMF assessed that increasing public investment is key for Indonesia to achieve high-income country status by 2045.

The fund noted that higher investment spending needs to be accompanied by additional revenue mobilisation to remain in line with the fiscal deficit ceiling of 3 per cent of gross domestic product (GDP).

“Additional revenue mobilisation would create the fiscal space needed to increase public investment whilst maintaining compliance with Indonesia’s long-standing fiscal rule,” the IMF report stated.

Beyond promoting revenue mobilisation, the IMF also stressed the importance of improving the efficiency of state expenditure. In its assessment, the impact of Indonesia’s public investment remains relatively limited in the short term due to an efficiency gap.

The IMF therefore recommended that the government improve the quality of public investment management, tighten project selection and evaluation processes, and ensure that spending is better targeted.