Ministry of Finance is reviewing its tax incentive policies following the implementation of the Global Minimum Tax (GMT), which sets a minimum effective tax rate of 15%. In shaping future incentive policies, the government is focusing on four key aspects: compliance with international tax rules, alignment with strategic economic priorities, proper targeting and timing, and regular evaluation.
Ministry of Finance Expert Staff for for Taxation Yon Arsal said the four aspects form the foundation for ensuring tax incentives remain effective while keeping pace with developments in global tax regulations.
“There are at least four key pillars for a sound tax incentive policy,” Yon said at the International Tax Conference 2026 in Jakarta on Wednesday (Sept. 16, 2026).
The four pillars are strategic relevance; being timely and targeted, while remaining temporary; and continuous evaluation.
GMT Impact
Yon said Indonesia’s tax incentive policies need to continuously adapt to changes in the international tax landscape. One key development is the implementation of the GMT, which sets a minimum effective tax rate of 15%.
The rule could reduce the benefits of several conventional tax incentives, particularly tax holidays and tax allowances, for multinational companies within the scope of the GMT.
With a minimum tax rate in place, incentives provided through tax rate reductions have become more limited. The government therefore needs to explore alternative instruments that remain consistent with international tax rules.
Potential options include cash grants, tax credits, and other forms of incentives tailored to the characteristics of specific sectors and investment needs.
Yon said diversifying incentive instruments is important to ensure Indonesia remains attractive to investors amid changes in the global tax system.
Economic Shifts
The second aspect concerns the relevance of incentives to economic developments and changes in the industrial structure. Yon said the government cannot rely solely on existing incentive schemes if the structure of the economy has changed.
Indonesia still relies heavily on conventional incentive instruments, including tax holidays, which are among the incentives available to the manufacturing sector.
Meanwhile, several countries in the region, including Malaysia, Thailand, and Vietnam, have begun placing greater emphasis on sectors such as the digital economy, electronics, and renewable energy.
The shift highlights the need for incentive schemes to evolve alongside sectors that are emerging as new sources of growth and investment.
Yon said the government faces two objectives that need to be pursued in tandem. On the one hand, incentives are needed to encourage productive investment. On the other, tax incentives must be designed with the government’s ability to safeguard revenue in mind.
“On the one hand, we face the challenge of attracting productive investment. On the other, when providing incentives, we must also protect government revenue,” he said.
Targeted Incentives
The third principle concerns the design and targeting of incentives. The government needs to ensure that tax facilities are provided to the right recipients, at the right time, and for a clearly defined period.
Yon cited the tax incentives introduced under the National Economic Recovery (Pemulihan Ekonomi Nasional/PEN) programme during the COVID-19 pandemic. At the time, various facilities were provided to help maintain household purchasing power, support economic activity, and sustain businesses, including micro, small and medium enterprises (MSMEs).
As the measures were designed to respond to extraordinary circumstances, several incentives were subject to limited validity periods, with some discontinued as economic conditions began to recover, including in 2022.
According to Yon, the experience highlights the importance of applying the time-bound principle when designing tax incentive policies.
“Indonesia’s experience during COVID-19 through the PEN programme reflects the application of the principles of timely, targeted, and temporary tax incentives,” he said.
Regular Evaluation
The final pillar is evaluation. The government needs to regularly assess whether an incentive continues to deliver benefits in line with its original policy objectives or needs to be adjusted.
Yon said the evaluation process is coordinated across several units within the Ministry of Finance, including the Directorate General of Taxes (DGT), the Directorate General of Economic and Fiscal Strategy (DJSEF), and the Inspectorate General. The government also works in coordination with the Audit Board of Indonesia (BPK) in carrying out the process.
The evaluation is necessary to ensure that the facilities provided deliver the intended impact. If an incentive is no longer relevant or has yet to produce the expected benefits, the policy can be revised or adjusted.
As a result, the provision of incentives does not end at the design and implementation stages. The government must also ensure that the facilities remain properly targeted, have clearly defined periods, and deliver benefits consistent with fiscal and economic objectives.
Yon acknowledged that applying the four principles remains a challenge for Indonesia. The government still needs to improve the accuracy of incentive targeting while strengthening evaluation mechanisms to ensure that its policies remain effective and responsive to changing economic conditions and international tax rules.
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