Menko Airlangga Denies Plans To Lower The Tax Threshold For MSMEs To IDR 3.6 Billion

Airlangga Hartarto, the Coordinating Minister for Economic Affairs, denied any plans to lower the income tax threshold for small and medium enterprises (SMEs) from 0.5 percent. He confirmed that the current threshold remains at Rp 4.8 billion per year for SMEs with annual revenues between Rp 500 million and Rp 4.8 billion. "The threshold is still Rp 4.8 billion. There are no plans to reduce it to Rp 3.6 billion," he stated at his office in Jakarta on Thursday, December 20, 2024. Airlangga mentioned that the government has not reviewed the income tax threshold for SMEs yet, but it may consider evaluating it in the future. "Yes, there will be evaluations, but currently, there are no plans for one," he added.

Earlier, there were reports suggesting that the SME threshold would be lowered from Rp 4.8 billion to Rp 3.6 billion annually. This was also confirmed by Susiwijono Moegiarso, the Secretary of the Coordinating Ministry for Economic Affairs. Susi noted that the proposed reduction was based on recommendations from the OECD (Organisation for Economic Co-operation and Development). "The plan for a reduction was mentioned by the Minister of Finance and the Coordinating Minister on several occasions, as there are recommendations from the OECD to align the threshold with best practices in other countries," she told the media in Jakarta on Tuesday, December 17, 2024. Susi explained that changing the income tax threshold for SMEs aims to create fairness and equality in the tax system and to broaden the tax base. She added that the plan is still under discussion while the government prepares to extend the 0.5 percent income tax incentive until the end of 2025. "Once we finalize the calculations, we will agree on the policy to lower the threshold," she said. The changes to the income tax threshold for SMEs will be regulated in a Government Regulation (PP).

The government plans to revise Government Regulation Number 55 of 2022, which currently governs income tax for small and medium enterprises (SMEs). "The regulation will definitely need changes. We are working on updating this regulation," he stated.

Finance Minister Sri Mulyani Indrawati has also mentioned that her team will review the 0.5 percent final income tax incentive for SMEs. She believes that applying tax incentives based on revenue is not entirely fair, as revenue does not accurately reflect a business's health. An SME might have revenue over Rp 500 million but could have high operating costs and be losing money. Despite this, they are still required to pay taxes. "The tax should be based on net profit. However, since many SMEs do not keep good records or prefer simplicity, it is easier to calculate based on revenue," she explained. Because SMEs often lack proper bookkeeping, the government encourages them to pay smaller taxes. If their records show a loss, they will not have to pay taxes, even if their revenue exceeds Rp 500 million.

Tag: Airlangga Hartarto Sri Mulyani Indrawati