Tax Withholding System Reform Aims to Lower Compliance Costs

Indonesia’s government is re‑examining the withholding tax (WHT) system, where payers deduct tax at source, to lower compliance costs. The analysis released on 16 October 2025 outlines the six current WHT categories: Articles 21, 22, 23, 15, 4(2) and 26.

The variety of rates, differing objects of deduction and divergent interpretations create heavy administrative burdens for taxpayers. The proposal calls for a uniform rate for all WHT types except Article 21, a reduction of tax categories into a few groups, and penalties limited to light fines instead of principal tax payments. It also suggests assigning rental income from individuals to Article 21 and consolidating construction‑related rates.

If adopted, the reforms should cut compliance expenses, improve fairness among taxpayers and enhance Indonesia’s business climate. Lower administrative load can reduce disputes between payers and recipients. The changes may also boost the country’s Ease‑of‑Doing‑Business score for tax administration. Read the full source at news.ddtc.co.id (https://news.ddtc.co.id/komunitas/lomba/1814479/mengurangi-cost-kepatuhan-melalui-transformasi-sistem-pemotongan-pajak).