No Tax Hikes in 2026, Sri Mulyani Stresses, as Prabowo Wins Labor Support on Reform
Key Takeaways
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JAKARTA, Investortrust.id — Finance Minister Sri Mulyani Indrawati has confirmed on Tuesday, Sept 2, 2025, that Indonesia will not raise tax rates in 2026, even as the government targets a 13.5% increase in tax revenue to Rp 2,357.7 trillion, equal to $152.3 billion. The higher revenue is needed to fund expanding state programs while keeping fiscal discipline.
Sri Mulyani emphasized that the government’s strategy will not rely on higher rates but on stronger enforcement and taxpayer compliance. “Taxes remain the same. What will improve is enforcement and compliance,” she told members of the Regional Representative Council in a virtual hearing.
The minister underlined that the state would ensure fairness by easing burdens on vulnerable groups. Micro, small, and medium enterprises (UMKM) with turnover under Rp 500 million are exempt from income tax. Those with revenue between Rp 500 million and Rp 4.8 billion pay only 0.5% final tax, far below the corporate income tax rate of 22%. “This shows revenue is safeguarded while solidarity for weaker groups is preserved,” she said.
Tax Reliefs and Fiscal Discipline
The government is also exempting health and education services from value-added tax. Meanwhile, Indonesians earning under Rp 60 million annually are not subject to personal income tax.
For 2026, central government spending is projected at Rp 3,136 trillion, divided into Rp 1,498.3 trillion for ministries and agencies and Rp 1,638.2 trillion for non-ministerial allocations. Of this, Rp 564.2 trillion covers basic operations such as salaries of Rp 332.8 trillion and operational spending of Rp 231.4 trillion. Priority programs account for Rp 934.1 trillion, including food subsidies and Rp 162.4 trillion for national health coverage.
The state budget deficit is projected at 2.48% of GDP, keeping the debt-to-GDP ratio stable at around 39.96%. “With better non-tax revenue management, innovation, and law enforcement, fiscal space will remain resilient against global volatility,” Sri Mulyani said.
Prabowo Gains Labor Support
On Monday, Sept 1, 2025, President Prabowo Subianto hosted union leaders, faith groups, party heads, and youth organizations at the State Palace in Jakarta. The meeting centered on labor rights, the labor law bill, the asset seizure bill, and tax reform.
Andi Gani Nena Wea, President of the Confederation of All-Indonesian Workers’ Union (KSPSI), voiced strong support for Prabowo. “We are not behind the President, we are beside him. We support peaceful demonstrations but reject rioters who disrupt political and economic stability,” he said.
Said Iqbal, President of the Confederation of Indonesian Trade Unions (KSPI), echoed that view, calling protests a constitutional channel for ordinary people to voice demands. “Demonstrations must be constructive, constitutional, and anti-violence. The President agrees,” he stated.
Prabowo assured union leaders that democracy will remain open and pledged to fast-track the two bills. “The President asked parliament to immediately deliberate and pass them,” Andi Gani explained.
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