Indonesia’s 2027
Tax Policy Direction

The government has released the 2027 Macroeconomic Framework and Fiscal Policy Principles (Kerangka Ekonomi Makro dan Pokok-Pokok Kebijakan Fiskal/KEM-PPKF) as the foundation for preparing the 2027 State Budget. More than a planning document, the KEM-PPKF offers an early indication of the government’s economic policy direction for the coming year.

For businesses and taxpayers, understanding the 2027 tax policy outlook is essential. The fiscal measures outlined in the KEM-PPKF will shape the investment climate, influence business planning, affect tax compliance, and determine which incentives remain available in the years ahead.

What Is the 2027 KEM-PPKF?

The KEM-PPKF is prepared pursuant to Law of the Republic of Indonesia Number 17 of 2003 concerning State Finance. It serves as the government’s principal framework for setting macroeconomic assumptions, projecting state revenues and expenditures, and defining fiscal strategies to achieve national development goals.

In the 2027 KEM-PPKF, the government has identified nine development priorities, comprising eight core clusters and one supporting cluster:

• food sovereignty;
• energy and water independence;
• education;
• healthcare;
• downstream industries and industrialization;
• infrastructure development;
• the people's economy;
• poverty alleviation; and
• strengthening national defense and security.

Delivering on these priorities will depend heavily on the government’s ability to maintain fiscal sustainability, with taxation continuing to be the backbone of state revenue.

2027 Macroeconomic Assumptions

The budget planning process begins with macroeconomic assumptions, which form the basis of fiscal policy design. These assumptions reflect the government’s expectations regarding economic conditions during the fiscal year and influence revenue and expenditure projections.

For 2027, the government is targeting economic growth of between 5.8% and 6.5%, higher than the 5.4% assumption used in the 2026 state budget. The higher target signals confidence in Indonesia’s economic prospects.

Inflation is expected to remain relatively stable at 1.5%–3.5%, while the IDR is projected to trade between 16,800 and 17,500 per USD.

In the energy sector, the Indonesian crude price is projected to range from USD 70 to USD 95 per barrel. Meanwhile, oil and gas lifting targets remain broadly stable, although production challenges at mature fields continue to pose risks.

Table 1. Comparison of Macroeconomic Assumptions: 2026 State Budget vs. 2027 KEM-PPKF

Fiscal Stance and Tax Revenue Targets for 2027

Based on these assumptions, the government projects total state revenue of between 11.82% and 12.4% of gross domestic product (GDP) in 2027. Tax revenue alone is expected to contribute between 10.02% and 10.5% of GDP.

These targets reaffirm the government’s continued reliance on taxation as the primary source of development financing. As a result, efforts to expand the tax base and strengthen compliance are expected to remain priorities.

On the expenditure side, government spending is projected at between 13.62% and 14.8% of GDP, with a focus on supporting priority development programs while sustaining economic growth momentum.

Meanwhile, the budget deficit is expected to remain within the range of 1.8%–2.4% of GDP, which reflects the government’s commitment to maintaining fiscal discipline.

Table 2. Fiscal Outlook for 2026-2027 (% of GDP)

Development Targets Supported by Fiscal Policy

By 2027, the government aims to eliminate extreme poverty entirely, while reducing the overall poverty rate to between 6.0% and 6.5%.

The unemployment rate is projected to decline to between 4.3% and 4.87%, supported by efforts to create more formal-sector jobs. The government targets formal employment to account for more than 40% of newly created jobs.

These targets provide the policy rationale for many of the fiscal and tax measures outlined in the KEM-PPKF.

Table 3. Development Targets for 2026-2027

Tax Policy Priorities for 2027

To support these development objectives, the government has outlined several strategic tax policy priorities.

1. Broadening the Tax Base

   A major focus will be on expanding the tax base through greater use of technology and data analytics. Particular attention will be directed toward the digital economy, the shadow economy, and segments of the informal sector that remain outside the reach of conventional tax administration.

    

2. Improving Tax Administration Through Coretax 

   The government will continue optimizing the Coretax system as part of its broader tax administration reform agenda. It also plans to leverage the Compliance Risk Management Integrated Risk Engine (CRM-IRE) to improve taxpayer monitoring and enhance revenue collection effectiveness.

    

3. Intensifying Oversight of High-Risk Taxpayers 

    

   Tax audits and compliance monitoring will increasingly target high-risk taxpayers, including large corporate groups, taxpayers engaged in related-party transactions, and high-net-worth individuals with significant economic activity.

    

   This approach implies the government’s growing emphasis on transfer pricing compliance and the taxation of wealthy individuals.

    

4. Enhancing Tax Enforcement

    

   Tax enforcement will increasingly adopt a multidirectional or multidoor approach, encouraging greater coordination among government agencies when addressing tax violations. The objective is to improve voluntary compliance by increasing the perceived likelihood of detection.

    

5. Reviewing and Optimizing Tax Incentives

   The government plans to evaluate existing tax incentives to ensure they continue to deliver measurable economic benefits. Incentives that demonstrably support investment, improve competitiveness, and create employment opportunities are likely to be retained, while those that generate limited impact may be revised or phased out.

Tax Incentives Set to Continue

Government-borne tax incentives will remain focused on strategic sectors.

The government plans to continue bearing income tax obligations for geothermal projects as part of its commitment to accelerating the energy transition and expanding renewable energy development. Similarly, tax incentives related to sovereign securities will be maintained to support investor confidence and preserve financial market stability.

Tax Support for Indonesia’s Semiconductor Industry

One of the most notable long-term policy developments is the government’s growing commitment to supporting the domestic semiconductor industry.

During the first phase of industry development from 2025 to 2029, Indonesia aims to establish local chip-design companies, develop small-scale fabrication facilities, and expand chip packaging and testing capabilities.

To support these ambitions, the government is preparing a range of fiscal incentives, including tax holidays, interest subsidies, and super deductions of up to 300% for research and development, workforce training, and innovation-related activities.

These measures demonstrate how taxation is increasingly being used not merely as a revenue-generating tool, but as a strategic instrument for industrial policy and economic transformation.

Also read:

The Chart of Accounts for Coretax Reporting

How the Middle East Conflict Affects Indonesia’s Economy

Directorate General of Taxes Regulation Number PER-7/PJ/2025