Finance Minister Purbaya Yudhi Sadewa responded to a proposal from the International Monetary Fund (IMF) suggesting that Indonesia increase the personal income tax (PPh) rate for employees.

The recommendation was put forward as a way to boost state revenue while ensuring that the State Budget (APBN) deficit does not exceed 3% of Gross Domestic Product (GDP).

However, Purbaya rejected the proposal. He explained that while the IMF’s suggestion may be constructive, policy decisions must align with Indonesia’s current economic conditions. The government does not want to abruptly raise taxes in a way that could weaken purchasing power, cause the economy to decline again, and ultimately force the country to take on additional debt.

Speaking at the House of Representatives on Wednesday (February 18, 2026), Purbaya emphasized that as long as Indonesia’s economy has not yet reached a strong position, the government will refrain from increasing tax rates. Instead, efforts to enhance state revenue will focus on expanding the tax base and closing tax leakage loopholes.

He assured that the government’s primary strategy is to accelerate economic growth so that tax revenues rise naturally, allowing the 3% deficit threshold to be maintained automatically without the need to increase tax rates.

Previously, in its long-term fiscal assessment, the IMF advised Indonesia to consider a gradual increase in employee income taxes as one potential funding source to strengthen public investment and support long-term development goals toward the Golden Vision 2045.

In the report, the IMF stated that higher public investment could stimulate economic growth and generate employment opportunities, but it requires sustainable financing sources.

One of the simulated policy options involved gradually raising labor income taxes to reduce reliance on deficit financing. Throughout 2025, Indonesia’s state budget deficit stood at 2,92% of GDP, close to the maximum 3% limit.