The Indonesian government, through the Coordinating Ministry for Economic Affairs, has stated the need to review the fiscal incentive schemes that have been used to attract foreign investment, particularly following the implementation of the global minimum tax (GMT). Secretary of the Coordinating Ministry for Economic Affairs, Susiwijono, explained that GMT, which sets a minimum effective tax rate of 15%, could affect the effectiveness of profit-based tax incentives such as tax holidays.
GMT is part of Indonesia's commitment to the international tax provisions under Pillar 2 of the Global anti-Base Erosion Rules (GloBE), with technical provisions regulated under PMK 136/2024. This mechanism ensures that multinational enterprise (MNE) groups with consolidated gross turnover of at least EUR750 million pay tax at a minimum effective rate of 15% in each jurisdiction where they operate. If the effective tax rate of a group in a particular jurisdiction falls below this threshold, a top-up tax will arise and be collected by other jurisdictions.
In this context, the tax holiday facility, which has long been Indonesia's mainstay incentive for attracting investment, risks losing its appeal, as tax savings obtained by companies through the facility could still be subject to top-up tax in other jurisdictions. Nevertheless, the government has not decided to discontinue the tax holiday facility and continues to study the incentive design most suitable amid developments in international tax standards.
Susiwijono also emphasized that besides fiscal incentives, expanding market access through international trade cooperation is an important instrument for enhancing national industrial competitiveness. Current global trade dynamics, including trade tensions and tariff policies of various countries, are seen as opening opportunities for Indonesia to attract investors seeking alternative production bases or suppliers.
Overall, the government is directing four key strategies to strengthen the downstream industry ecosystem and high-value-added industries: strengthening investment, providing competitive incentives, improving domestic supply chains, and expanding market access. The government believes these strategies can deliver dual benefits: opening wider market access for Indonesian products while making Indonesia more attractive to investors.
