Indonesia’s New Tax Strategy Sparks Backlash as Businesses Slam ‘Restitution Freeze’ Proposal

JAKARTA, Investortrust.id — A high-stakes standoff is brewing in Jakarta between the government and the nation’s business elite over a proposal to freeze tax refunds, a move officials claim could save the state Rp 500 trillion ($31.4 billion).

Finance Minister Purbaya Yudhi Sadewa signaled a hardline shift during a parliamentary hearing on Wednesday, Feb. 4, 2026, characterizing the current tax restitution system—where the state refunds overpaid taxes to companies—bagai "leaking." He argued that some firms have manipulated costs to shrink their margins artificially while pulling massive refunds from the state.

For global investors, this is a litmus test for Indonesia’s fiscal reliability. While the government seeks to plug a budget hole and end what it calls "accidental subsidies" to wealthy coal miners, the private sector views the move as an assault on liquidity. If tax refunds—which are legally recognized assets for corporations—are withheld, capital-intensive sectors like manufacturing and mining could see their cash flows evaporate, potentially stalling the very industrialization President Prabowo Subianto has promised to accelerate.

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The Business Backlash

Kadin Indonesia, the Indonesian Chamber of Commerce and Industry, wasted no time in firing back. Saleh Husin, Kadin’s Vice Chairman for Industry, stated on Thursday, April 9, 2026, that the business world requires "tranquility and certainty" to maintain employment and drive growth.

"Business actors in Kadin fully support the President’s programs, including job creation," Husin said in a statement. "However, this can only happen if there is business peace and certainty, not policies that make the climate more difficult, especially for manufacturing which employs millions."

The friction follows a suggestion by Mukhamad Misbakhun, Chairman of Commission XI of the House of Representatives (DPR), who suggested that delaying restitutions would provide a critical fiscal cushion against surging global energy prices.

Cracking Down on ‘Negative’ Tax Revenue

The Finance Minister is particularly focused on the coal industry. Under current laws, coal companies often pay royalties and income tax only to receive larger sums back in Value Added Tax (VAT) refunds, resulting in a "net negative" for the state.

"If I look at the net, they pay tax, they pay royalty, but it’s all pulled back in restitution. I get a negative result," Purbaya told reporters at his office on Wednesday, Dec. 31, 2025. "So I am subsidizing coal companies that are already wealthy. Do you think that’s fair?"

Purbaya estimated that the state loses roughly Rp 25 trillion ($1.57 billion) every year specifically to coal restitutions. He attributed this anomaly to the Omnibus Law on Job Creation, which reclassified coal as a taxable good, unwittingly opening the door for massive refund claims.

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The New Export Levy Strategy

To balance the scales, the government is bypassing intense negotiations with coal barons to implement a tiered export levy via a Presidential Regulation. Purbaya confirmed that the levy will be price-sensitive, with proposed rates of 5%, 8%, and 11% depending on market benchmarks.

"They are already making huge profits," Purbaya noted during his December briefing. "I just want to bring things back to normal."

Despite the government's resolve, Kadin warns that the "wait and see" approach from investors could harden into a full-scale retreat if the government treats tax refunds—a legal right of the taxpayer—as a discretionary fiscal tool. "Do not let policies emerge that create uncertainty and impact investment interest," warned Husin, a former Industry Minister.