By: David Dwira
Fiscal policy is a critical tool to ensure that national economic prosperity is felt equitably, particularly among grassroots communities. Currently, Indonesia’s fiscal policy is increasingly showing a pro-people orientation, focusing on productive sectors such as Micro, Small, and Medium Enterprises (MSMEs) and strengthening regional economic bases. The government aims to ensure that economic growth is not concentrated in large cities but reaches remote and underdeveloped areas.
Finance Minister Purbaya Yudhi Sadewa has been a central figure in this pro-people fiscal approach. His focus on empowering MSMEs demonstrates the government’s commitment to inclusive economic development. The two main pillars of his policy—tax incentives for MSMEs and strict enforcement against misuse of these incentives—highlight a balance between support and integrity.
A key initiative is the extension of the final 0.5% income tax (PPh Final) for MSMEs until 2029, which provides certainty and room for small businesses to grow. This policy enables millions of MSMEs to transition from survival-oriented operations to growth-oriented enterprises. Over time, it is expected to enhance domestic competitiveness and open opportunities for MSMEs to access export markets.
However, the policy includes strict oversight. Minister Purbaya highlighted the problem of “business splitting”, where larger enterprises artificially divide their operations to qualify for MSME tax rates. Such practices undermine fiscal fairness and disadvantage genuine small business owners. The government’s efforts to investigate and sanction these abuses reflect its commitment to maintaining the integrity of the national tax system.
Beyond taxation, attention is given to protecting MSMEs from unfair trade practices, such as the influx of illegal imports like second-hand clothing, which depress domestic production and harm local textile industries. Cracking down on illegal import networks and complicit officials demonstrates the government’s commitment to economic sovereignty and creates new jobs in small and medium industries, the backbone of the people’s economy.
Fiscal equity at the regional level is also crucial. Bursah Zarnubi, Chairman of the Association of Indonesian Regency Governments (APKASI), emphasized that fiscal justice should underpin all national policies. Fair fiscal policy is not just about budget numbers but about reviving local autonomy and enabling regional governments to fully harness their development potential.
Bursah noted that current fiscal policies often lean toward recentralization, limiting local initiative in development planning. He advocates viewing regions as equal partners, not fiscal burdens. A decentralized approach strengthens economic equity and generates more jobs at the regional level.
The synergy between national pro-MSME fiscal policies and regional fiscal justice is key to equitable prosperity. Tax incentives from the central government must be complemented by regional policies that facilitate business, streamline licensing, and provide infrastructure support for productive sectors.
Pro-people fiscal policy also has a multiplier effect on job creation. As MSMEs grow, demand for local labor increases, reducing unemployment and boosting purchasing power at the grassroots level. This accelerates the circulation of economic activity in the regions.
Extending fiscal incentives for MSMEs and strengthening regional fiscal equity is a comprehensive strategy demonstrating the government’s commitment to empowering the people’s economy. Policies are not only aimed at increasing state revenue but also emphasize equitable growth and regional self-reliance.
The Indonesian economy’s strength lies not in large conglomerates alone but in millions of MSMEs across the archipelago. Providing a healthy fiscal environment, pro-people policies, and strict enforcement against abuse creates the foundation for an inclusive and fair economy.
Ultimately, the success of pro-people fiscal policy is measured not only by macro-stability but by its direct impact on public welfare. MSME incentives, protection of domestic industries, and equitable regional fiscal distribution form a strong foundation for resilient, independent, and socially equitable economic growth. With a fiscal approach that favors the people, Indonesia is moving toward true economic independence, where growth benefits all citizens, not just a select few.
— The author is an Economic Observer.
