To Prevent PPPK Layoffs, Home Affairs Minister Suggests Efficiency Measures and Tax Optimisation

JAKARTA, KOMPAS.com - Home Affairs Minister Tito Karnavian has offered several solutions regarding the threat of termination of employment contracts for Government Employees with Work Agreements (PPPK) in the regions.

This discourse has arisen due to regulations on the maximum limit for personnel expenditure stipulated in Law Number 1 of 2022 on Financial Relations between the Central Government and Regional Governments (HKPD).

The regulation limits personnel spending from the Regional Budget (APBD) to only 30 percent. However, the rule officially applies in 2027.

“This means that for five years from 1 January 2022 to 2027, if they exceed 30 percent, it is not yet a violation because a five-year transition is allowed. Then, on 1 January 2027, it must be at 30 percent,” said Tito during a meeting of Commission II of the House of Representatives (DPR RI), Parliamentary Complex, Jakarta, on Monday (30/3/2026).

“I said we must sit together as three parties. And after that, perhaps we also need to convey it to the DPR. There are several solutions,” said Tito.

One of the solutions presented by Tito is to ask regional heads to carry out efficiencies in other expenditures.

The efficiencies in question, for example, relate to official travel, food and beverages, and budgets for meeting activities.

Tito gave examples of several regions that have successfully made savings to address the potential layoffs of PPPK, including Lahat Regency, which managed to save more than Rp 400 billion.

“Yesterday, the Director General of Regional Finance went to West Sulawesi; it was over 34 percent. Well, to get to 30 percent, the solution is to check food and beverages, expenditures, all official travel and meetings; if reduced, it can partially cover the PPPK,” Tito continued.

Tito suggested that hotel and restaurant taxes could go directly to the Regional Revenue Service (Dispenda).

“For example, hotel and restaurant taxes that can go directly to Dispenda. There are several other regions that implement surface taxes for large companies. But do not burden the small people; that is the main principle,” Tito emphasised.

Furthermore, he encouraged regional governments to properly activate Regional Owned Enterprises (BUMD) and regional companies (perusda) to generate additional Regional Original Revenue (PAD).

“We encourage that; please convey it,” Tito continued.