Executive Summary

Key insights and market outlook

The Indonesian government has decided not to increase the tax-free income threshold (PTKP) from its current level of Rp 54 million per year for 2026 ¹

. This decision comes despite rising living costs and inflation, maintaining the threshold that has been in place since 2016. Experts warn that this could lead to bracket creep, particularly affecting middle-class taxpayers ². The decision reflects a complex balance between fiscal policy and growing demands for tax relief amid increasing living costs.

Full Analysis

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Deep Dive Analysis

Government Maintains Tax-Free Income Threshold Amid Economic Pressures

Decision for 2026

The Indonesian government has chosen not to adjust the tax-free income threshold (PTKP) for 2026, keeping it at Rp 54 million per year as it has been since 2016 ¹

. This decision comes despite ongoing inflation and rising living costs that have characterized the Indonesian economy in recent years. The Ministry of Finance's Director General for Economic and Fiscal Strategy, Febrio Nathan Kacaribu, confirmed that there are no plans to increase the PTKP in 2026 ¹.

Economic Implications

Maintaining the current PTKP level has raised concerns among economists about the potential for bracket creep - a phenomenon where inflation pushes taxpayers into higher tax brackets even if their real income hasn't increased ²

. M Rizal Taufikurahman from the Institute for Development of Economics and Finance (Indef) noted that the current PTKP of Rp 54 million is becoming increasingly irrelevant in today's economic conditions ².

Historical Context

The PTKP was last adjusted in 2016 when it was increased to Rp 54 million. According to Fajry Akbar from the Center for Indonesia Taxation Analysis (CITA), Indonesia's PTKP is actually considered relatively high compared to other Southeast Asian countries ³

. However, the static PTKP since 2016, while inflation continued to rise, has eroded its effectiveness.

Impact on Workers

The static PTKP is particularly concerning for minimum wage earners. Ariawan Rahmat from the Indonesia Economic Fiscal (IEF) Research Institute pointed out that in Jakarta, where the minimum wage is Rp 5.396 million per month (approximately Rp 64.75 million per year), even single workers are now considered taxable ⁴

. This situation highlights the growing tension between wage levels and tax obligations.

Government's Position

The Directorate General of Taxes has acknowledged the static nature of PTKP but has not indicated any immediate plans for change ⁵

. The government faces a delicate balance between maintaining fiscal stability and responding to growing demands for tax relief amid rising living costs.

References