Indonesia’s property sector is set to undergo significant changes under the administration of President Prabowo Subianto, with plans to implement a range of positive stimuli. The most attention-grabbing proposal is the potential elimination of property taxes, which currently amount to 16%. This bold move is intended to alleviate financial burdens and boost activity in the property market, a sector that plays a vital role in the country’s economy.
One of the primary reforms being discussed is the removal of two key taxes: the 11% Value Added Tax (VAT) and the 5% Land and Building Acquisition Duty (BPHTB). These taxes have long been considered a heavy load for both homeowners and developers.
This plan was revealed by Hashim Djojohadikusumo, Prabowo’s brother and the head of the Housing Task Force. In a recent statement, Hashim shared that the government is seriously considering the suspension of these taxes, possibly for a period of one to three years.
“There have been discussions about removing the 11% VAT temporarily, maybe for one, two, or even three years. This would reduce the financial burden. Additionally, there is the 5% BPHTB,” Hashim explained during the Propertinomic Executive Dialogue held at the Grand Sahid Jaya Hotel, Jakarta, on October 10.
He emphasized that these tax reductions could be a significant economic stimulus. “We are recommending that the 16% property tax be removed temporarily. While it might initially result in revenue loss, we believe this move will stimulate the economy and alleviate poverty,” he stated, receiving applause from the event’s attendees.
In response to concerns about the loss of government revenue, Hashim revealed that President Prabowo has already devised a plan. A newly established Ministry of State Revenues will be tasked with finding alternative sources of income to make up for the loss from property tax cuts.
Hashim added, “We will establish a Ministry of State Revenues, separate from the Ministry of Finance, to handle this. I already know the candidate for the Minister of State Revenues, and so far, nothing has changed in that regard.”
The government has already begun discussing ways to replace the revenue, with one idea being to impose taxes on contractors. Although details are still scarce, the team has been exploring various avenues to ensure there’s no gap in revenue generation.
In addition, Hashim invited various experts to assist in calculating the potential financial impact of removing property taxes. “We are also working with several parties to calculate the potential revenue loss from this policy,” he said.
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The proposed tax relief is expected to be implemented for a period of one to three years. The primary goal is to boost activity in Indonesia’s property sector, which has extensive links to over 185 related industries, including construction, manufacturing, and raw material production.
This stimulus package is seen as part of a larger strategy to revitalize the property sector, which in turn could create a ripple effect throughout the broader economy. Hashim is confident that this initiative will not only attract more investments into the property sector but also promote sustainable growth across many other industries.
Despite the potential benefits, the government acknowledges that the proposal has raised questions regarding fiscal sustainability. Yet, by introducing the Ministry of State Revenues, the administration is signaling its readiness to tackle these challenges and implement creative solutions to secure alternative revenue streams.
As Indonesia continues its economic recovery and looks to stimulate growth, President Prabowo’s administration is clearly committed to making bold decisions that support the country’s property sector and, by extension, its wider economic landscape. This initiative, while ambitious, reflects the government’s determination to balance economic growth with financial responsibility, making it a critical policy to watch in the coming years.
