Arnoldus Kristianus, Jakarta – Several economists have warned that the government's decision to temporarily exempt income tax for workers earning up to Rp 10 million ($598) per month could create longer-term problems, as the incentive is not permanent.
The policy targets employees in labor-intensive sectors such as textiles and footwear, aiming to boost purchasing power and support industries that generate large numbers of jobs.
However, the measure could backfire for workers once the incentive expires, said Syafruddin Karimi, an economist at Andalas University.
Syafruddin said that while workers would enjoy higher take-home pay during the exemption period, they could face a sudden decline in disposable income once the tax relief ends, potentially creating a "shock" effect on household consumption.
He argued that policies with longer-term welfare impacts are needed, such as improving job quality, ensuring greater certainty of working hours, and strengthening industries that generate stable labor demand.
"Without strengthening production and productivity, tax relaxation will function only as a cyclical buffer, not as a driver of sustainable welfare," Syafruddin said in an interview on Sunday.
He added that limiting the income tax exemption to labor-intensive industries and tourism was intended to reduce the risk of layoffs in sectors most sensitive to demand fluctuations and cost competition, including textiles, footwear, leather goods, furniture, and tourism.
However, many low-income workers in other sectors – such as logistics, retail, food and beverages, care services, and even agriculture – also require support but are excluded from the tax relief scheme, he said. Policies that focus on selected sectors risk creating inter-sector inequality, as workers with similar incomes are subject to different tax treatment.
In the medium term, Syafruddin also warned that the policy could narrow the tax base, as a new norm may emerge in which workers and companies come to view income tax as a burden that should be borne by the state.
Separately, tax analyst Fajry Akbar from the Center for Indonesia Taxation Analysis said similar policies in the past had proven ineffective.
He noted that the benefits primarily accrue to employees rather than companies, while cases of abuse have also occurred, with some firms applying for incentives but failing to pass the benefits on to workers.
"Employees have limited ability to monitor this, as incentive applications are submitted by corporations," Fajry said. "If such cases are widespread, the policy's effectiveness in sustaining and stimulating consumption becomes questionable."