Purbaya Optimistic Winning Severance and Pension Tax Case at MK

Finance Minister Purbaya Yudhi Sadewa said the government expects to win the Constitutional Court's material test of severance and pension tax on Tuesday 14 October 2025. The hearing took place in Jakarta.

Petitioners Rosul Siregar and Maksum Harahap filed a material test against Article 4 paragraph (1) and Article 17 of the Income Tax Law, which impose progressive rates on severance pay and pensions. They argue that these payments are workers' final savings, not new business income, and should not be taxed like ordinary earnings. Their lawyer, Ali Mukmin, emphasized that the tax has been collected for decades and now appears unconstitutional.

If the Constitutional Court annuls the contested articles, the government must stop applying progressive tax rates to severance, pensions, old‑age benefits and old‑age security for all Indonesians. A ruling upholding the law would keep the current final tax rates of 0 % to 25 % for severance and 0 % to 5 % for pensions, depending on the gross amount. The decision will affect the tax burden on workers and employers when paying these benefits.