AmCham Update Vol. 6 #66

Major Import Policy Overhaul Introduced, Prabowo Praises Police for Role in Corn Farming, Tax Revenue Falling Short for 2025, New E-Commerce Tax System to Start in July, DPR Halts OJK Heath Co-Pay System

Jul 02, 2025

Major Import Deregulation Introduced

Indonesia has formally revamped its import policies by replacing the existing framework with a new regulation, Permendag 16/2025, just ahead of the deadline for the imposition of reciprocal tariffs from the United States on July 9.

This is the first phase of the government’s ongoing deregulatory agenda and is aligned with President Prabowo Subianto’s directive to improve the business climate and simplify trade procedures.

Trade Minister Budi Santoso said on June 30 that both Permendag 36/2023 and Permendag 8/2024 had been replaced with new regulations. This cluster approach, according to Budi, will make the policy more flexible and easier to revise in the future.

“We’ve structured the Permendag regulations by cluster to allow easier updates going forward,” he said.

Permendag 16/2025 will regulate general import provisions, while the remaining eight regulations address specific sectors, including textiles, agriculture, fisheries, chemicals, electronics, industrial goods, consumer products, and used or non-hazardous waste.

The regulations will take effect in 60 days to allow time for technical and operational adjustments.

Indonesia’s traditionally restrictive import procedures have long been a source of concern for investors and AmCham Indonesia has frequently advocated for easing the policy. The restrictions have also played a role in increasing the trade deficit with the US, a major factor in the looming tariff threat.

Coordinating Minister for Economic Affairs Airlangga Hartarto emphasized that the reform is aimed not only at simplifying licensing but also at strengthening competitiveness and supporting sustainable growth. He framed the effort as part of broader structural changes to reduce bureaucratic inefficiencies in trade policy.

The policy shift has drawn mixed reactions. House Commission VII member Beniyanto voiced concern that deregulation could weaken protections for domestic industries, particularly in sectors sensitive to foreign competition. He about a surge in low-cost imports and emphasized that deregulation must be accompanied by strong safeguards, cross-sector coordination, and a commitment to industrial resilience.

Meanwhile, the Indonesian Employers Association welcomed the reform, especially for labor-intensive industries. Chairwoman Shinta Kamdani supported the cluster-based approach as more adaptive to global and domestic shifts.

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Prabowo Credits National Police for Record Corn Harvest

President Prabowo Subianto is placing the Indonesian National Police (Polri) at the center of the country’s agricultural ambitions. Speaking at the 79th Bhayangkara Day celebration in Jakarta on July 1, he praised the police not just for maintaining order, but for helping Indonesia break records in corn production.

“Polri is showing what national service means, by helping feed our people,” said Subianto, highlighting the police role in food programs and farming initiatives.

Under the leadership of Police Chief General Listyo Sigit Prabowo, the force has teamed up with the Agriculture Ministry and over 135,000 farmer groups to plant corn on 429,000 hectares of land. Officers have helped distribute seeds, fertilizers, and farm equipment, while also ensuring aid reaches its intended targets. These efforts produced an estimated 2.08 to 2.5 million tons of corn in the first half of 2025.

The program is far from finished. Polri plans to scale up planting to 750,000 hectares in the third quarter, with hopes of reaching a yield of 7.5 million tons. “We’re ready to fully support the government’s mission,” said Listyo.

Corn production has seen a huge jump, with 9.03 million tons recorded in Q1 2025, up nearly 50 percent from the same period in 2024. Still, Subianto reminded the audience that Indonesia imported 500,000 tons of corn as recently as last year. With current momentum, he believes self-sufficiency by 2026 is within reach.

In parallel with the farming effort, Polri has also rolled out a network of community nutrition centers in support of the government’s flagship free nutritious meals program. The centers are expected to reach more than 430,000 people, especially children and mothers.

Wrapping up his remarks, Subianto emphasized that the police now carries a much larger responsibility in protecting the nation beyond law enforcement. As Indonesia moves into a new phase of development, he called on the police to stay rooted in public service.

“Keep fighting, protect the people’s trust, and always put their needs first,” he said.

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Tax Revenue Falling Short for 2025

Indonesia is unlikely to meet its state-budget tax revenue target for 2025, Finance Minister Sri Mulyani Indrawati said on July 1, citing several economic challenges.

The Finance Ministry's latest projections show tax revenue reaching Rp 2,706.9 trillion ($166.8 billion), short of the official target of Rp 2,789 trillion ($171.9 billion).

“Based on our latest calculations, tax revenue will reach Rp 2,706.9 trillion, or 94.9 percent of the 2025 budget target,” Sri Mulyani told a hearing with the House of Representatives’ (DPR) Budget Committee in Jakarta.

As a result of the shortfalls and President Prabowo Subianto’s spending priorities, the budget deficit has grown to 0.84 percent, still well within legal limits but an uptick from the 0.34 percent posted for the same period in 2024, she told the DPR.

"We are still guarding the deficit,” Sri Mulyani told the committee.

She said efforts to increase tax collection this year have faced multiple hurdles. Among them is the government’s decision to cancel the scheduled increase in the value-added tax (VAT) from 11 percent to 12 percent.

Revenues have fallen short of 2024. In the first half of 2025, tax revenue stood at Rp 831.26 trillion ($51.2 billion), equivalent to 38 percent of the annual target and 7 percent less than the same period last year.

The revenue picture incudes:

Income Tax Rp 491.1 trillion, down 11.3 percent from the first half of 2024.
Value-Added Tax (VAT) and Luxury Goods Sales Tax Rp 267.27 trillion, down 19.7 percent, year-on-year.
Property Tax Rp 11.5 trillion, a 247.2 percent increase from the first half of 2024.
Other taxes Rp 61.33 trillion, a 1,550.6 percent from the same period last year.

Sri Mulyani noted that despite some gains in specific tax categories, broader economic pressures – particularly in the commodity sector – are weighing on the government’s ability to meet its tax targets for 2025.

She also told the committee that the government is accelerating budget spending by releasing technically blocked funds. As of June, Rp134.9 trillion in budget funds were available. She said the release of funds was in line with the president’s priorities.

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New E-Commerce Tax Collection System to Start in July

The Indonesian government is set to begin enforcing a new mechanism for collecting Article 22 income tax (PPh 22) from e-commerce merchants starting in July.

Under the new directive, e-commerce platforms will be required to withhold and pass on a 0.5 percent levy on sales revenue to the tax authorities from merchants with an annual turnover exceeding Rp 500 million. This marks a shift from the previous system of voluntary self-reporting by sellers with automatic tax deductions executed by digital marketplaces.

Officials from the Ministry of Finance clarified that this is not a new tax, but rather a reform in tax collection. The goal is to create a fairer taxation system that treats online and offline businesses equally.

Febrio Kacaribu, Director General of Economic and Fiscal Strategy, emphasized that similar mechanisms are already in place for global digital platforms such as Google and Netflix. “This regulation ensures fairness,” Febrio said. “Offline sellers already pay VAT when selling goods. Online sellers must also be part of the same system.”

The new system is expected to simplify tax compliance for sellers by automating the process and eliminating the need for manual reporting. It also aims to prevent double taxation for businesses operating both online and offline, improve transparency in digital transactions, and close gaps in the shadow economy.

Deputy Finance Minister Anggito Abimanyu noted that the regulation formalizing this directive is still in the finalization stage and has not yet been officially issued. “The policy hasn’t been released yet. Let’s wait until it’s officially published,” he said during a press briefing at the Ministry of Trade on June 30.

In response, Budi Primawan, Secretary General of the Indonesian E-Commerce Association (idEA), said the association supports fair and transparent taxation policies, but stressed the importance of implementing such policies gradually and carefully.

A joint report by Temasek and Bain & Company revealed that Indonesia’s digital economy reached a gross merchandise value (GMV) of $65 billion, or approximately Rp 1,059 trillion, in 2024. That figure is projected to more than double to $150 billion, or Rp 2,444 trillion, by 2030.

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OJK Health Co-Pay Scheme Stopped by DPR

A controversial plan to require policyholders to pay 10 percent of health insurance claims as a co-payment has been postponed indefinitely by Commission XI of the House of Representatives (DPR) and the Financial Services Authority (OJK). Circular Letter 7/2025 on health insurance products was to take effect on Jan.1, 2026, but was met with public resistance.

Mukhamad Misbakhun, the Chair of Commission XI, urged the OJK to replace the circular letter with an OJK Regulation (POJK), which led to the delay. "OJK will postpone the implementation of the circular until the POJK is enacted," he said during a meeting with OJK officials at the DPR building in Jakarta on June 30.

The co-pay scheme would require policyholders to cover at least 10 percent of their total claim, with a maximum limit of Rp 300,000 for outpatient care and Rp3 million for inpatient care.

After OJK drafts the new regulation, Commission XI plans to involve the insurance industry and other key stakeholders in discussions. "This needs to be regulated more holistically and comprehensively, not just from one side," Misbakhun said.

Ogi Prastomiyono, Chief Executive of the Insurance, Guarantee, and Pension Fund Supervisory Agency of OJK, confirmed that his agency would comply with the DPR request.

Ogi explained that the Circular Letter was issued at the request of the insurance industry. However, OJK also has a vested interest, as the current state of the insurance sector is deemed "unhealthy."

"This is a step to improve the health insurance ecosystem," he stated.

Tempo reported on June 22 that the insurance industry had long lobbied the OJK to implement a co-payment scheme. The pressure intensified after insurance companies were hit with a surge in claims following the COVID-19 pandemic, in addition to medical inflation and rising healthcare costs.

Eric Hermawan, a member of Commission XI, argued that the co-pay policy primarily benefits insurance companies and that the DPR was not consulted on the measure.

Eric criticized the OJK for failing to involve the public in formulating the policy. He believes the regulation must prioritize the public interest. "There should be a people’s approach. The people should be asked if they want co-payments," he concluded.

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Update is AmCham’s regular newsletter on developments related to investment, the economy, regulations and issues related to doing business in Indonesia. It comes out three times a week. It is edited by AmCham Managing Director Donna Priadi and written by the AmCham Staff

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