Purbaya on Private-Sector THR Taxation While Civil Servants Are Not

Jakarta — Finance Minister Purbaya Yudhi Sadewa also spoke out after protests over tax deductions on private-sector employees’ Hari Raya allowance (THR) that are different from the THR for the Apparatus Civil Servants (ASN), the Indonesian National Armed Forces (TNI) and the Indonesian Police (Polri). Although for private-sector workers the income tax under Article 21 (PPh Pasal 21) is also deducted, the THR for ASN is funded by the government, so in his view it is legitimate if the tax on THR for ASN, TNI and Polri is covered by the state. Thus, Purbaya said that if private-sector workers protest the imposition of PPh Article 21 on THR, workers can ask their bosses or employers to bear the tax deduction on THR. Purbaya explained that rules cannot be changed piecemeal just because some parties protest the deduction of PPh Pasal 21 on THR. However, the state treasurer said there are several industry sectors that receive incentives in the form of taxes borne by the government (DTP) for wages paid to employees. In a separate interview, Director General of Taxes at the Ministry of Finance, Bimo Wijayanto, explained that THR is irregular income. Under Government Regulation No. 58 of 2023, the calculation of tax deduction on THR uses the Average Effective Rate (TER) mechanism. In this case, THR is not calculated separately, but combined with the monthly salary. As a result, total gross income in that month can rise significantly compared with previous months. “Everything is taxed. THR is part of irregular income for the year, so it can be one or two times. If ASN, TNI, Polri, that is also taxed, only because the funding from the APBN is borne by the government,” he explained. Nevertheless, Bimo believes that a number of companies have already borne the tax deductions on THR received by their employees. Thus, the allowances received by those employees remain intact.