Indonesia's Purbaya Responds to IMF Employee Tax Hike Plan

February 19, 2026 | 02:12 pm

TEMPO.CO, Jakarta - Finance Minister Purbaya Yudhi Sadewa has commented on an International Monetary Fund (IMF) simulation that includes a gradual increase in Employee Income Tax (PPh 21) as an alternative for strengthening public investment. Although he considered the proposal sound, Purbaya stated that the government will not alter the tax rate in the near future.

"The IMF proposal to raise taxes is good. As I said before, until the economy is strong, we will not change the tax rate. But we will focus on tax extension, closing tax leaks, and others," said Purbaya after a coordination meeting for the Sumatra Post-Disaster Recovery Task Force in Jakarta on Wednesday, February 18, 2026, as quoted from Antara.

Instead of raising the rate, Purbaya chose to focus on expanding the tax base, improving compliance, and accelerating economic growth to control the deficit without adding to the taxpayer burden. "And what I can ensure is for the economy to grow faster, so my tax will be higher. So that the 3 percent fiscal deficit to GDP ratio can be avoided automatically," he said.

Previously, the IMF assessed that increasing public investment is key for Indonesia to achieve high-income status by 2045. The agency stated this in a report titled 'Golden Vision 2045: Making The Most Out of Public Investment'.

The IMF revealed that higher investment spending must be accompanied by the mobilization of additional revenue. Thus, investment spending remains in line with the maximum fiscal deficit rule of 3 percent of Gross Domestic Product (GDP).

"Mobilizing additional revenues will create the fiscal space needed to scale up the public investment while maintaining compliance with Indonesia’s longstanding fiscal rules," the IMF wrote in the report.

Throughout 2025, Indonesia's deficit was recorded near the threshold at approximately 2.92 percent of GDP. However, the IMF did not explicitly recommend an increase in specific tax types in the report. One detail in the report explains how an increase in Employee Income Tax is simulated as financing in an economic model, rather than a binding policy recommendation.

Beyond advocating for revenue mobilization, the IMF also emphasized the importance of increasing state spending efficiency. In its study, the impact of Indonesia's public investment is considered limited in the short term due to an efficiency gap. The agency suggested that the government improve public investment management, tighten project selection, and ensure targeted spending.

Read: Ideal Tax Ratio Figure for Indonesia Difficult to Determine, Says Minister Purbaya

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