Indonesia Extends Tax Relief to Tourism Workers as Economic Stimulus Takes Effect

Minister of Tourism Widiyanti Putri Wardhana confirmed that the incentive is specifically directed at employees in the Hotel, Restaurant, and Cafe (Horeca) sector. The tax relief applies to workers earning a gross monthly wage of up to IDR 10 million (approx. USD $640), ensuring that the benefit is focused on low and middle-income earners within the industry.

"The PPh 21 tax relief should begin this month. This tax, borne by the government, is for workers with salaries under IDR 10 million," Minister Wardhana stated.

This incentive is one of eight programs included in a comprehensive economic stimulus package launched in mid-September 2025 by Indonesian President Prabowo Subianto. The initiative targets an estimated 552,000 workers and provides a 100 percent tax subsidy on their PPh 21 liability.

Crucially, the government has provided financial certainty beyond the current year. Coordinating Minister for Economic Affairs Airlangga Hartarto announced that the tax holiday will be extended. While the incentive is budgeted at IDR 120 billion for the remaining three months of the current tax year, it will continue throughout the 2026 fiscal year for workers within the same wage bracket, with an estimated budget of IDR 480 billion.

The Tourism Ministry is also examining the possibility of extending similar tax incentives to hotel and lodging business owners. Minister Wardhana noted that while the overall Hotel Occupancy Rate has started to improve, the industry still faces structural challenges. The rise of alternative accommodation, particularly unregulated villas in strategic tourist areas, is affecting conventional hotel performance and tax collection.

"Many villas are unregistered and do not pay taxes," she pointed out, underscoring the government's need to balance stimulus measures with efforts to reform and regulate the entire tourism accommodation ecosystem. Ultimately, the expanded tax incentive aims to provide immediate financial relief to hundreds of thousands of workers while laying the groundwork for a more robust and equitable recovery in Indonesia's vital tourism sector.

Tourism Industry of Indonesia

Indonesia's tourism sector is a cornerstone of the national economy, boasting immense natural and cultural wealth that drives significant growth and employment. However, several key infrastructural and environmental challenges need to be addressed in order to safeguard continued growth of the sector.

Indonesia is the world's largest archipelago, offering a vast array of attractions, from the world-renowned beaches of Bali to the diving sites of Raja Ampat and cultural heritage destinations such as the Borobudur near Yogyakarta. The government is actively promoting Five Super-Priority Destinations (including Lake Toba, Mandalika, and Labuan Bajo) to diversify visitor flow beyond Bali.

The sector is projected for significant growth, with the World Travel & Tourism Council (WTTC) predicting a substantial increase in its contribution to the national GDP and job creation, supporting over 12.5 million jobs and growing in excess of the 2019 peak.

Moreover, there is rising global interest in ecotourism, wellness and medical tourism, and gastronomy. Government initiatives like the Wonderful Indonesia Gourmet program aim to strategically position the country as a world-class culinary destination.

Meanwhile, Indonesia has consistently been ranked high for the price competitiveness of its tourism and the friendliness of its people, enhancing the overall tourist experience.

However, despite its strengths, the tourism sector of Indonesia also faces hurdles that must be overcome to realize its full potential.

For example, while major destinations are accessible, uneven development persists. Many priority areas, especially in Eastern Indonesia, still lack adequate transportation access and quality tourist service infrastructure (e.g., sanitation and hygiene). Domestic flight tickets can also be comparatively expensive.

Popular destinations like Bali face risks of overtourism, leading to environmental stress, waste management issues, and the erosion of local cultural heritage. There is a pressing need to expand sustainable and regenerative tourism practices nationwide.

A significant portion of the tourism workforce is reported to lack adequate training according to international standards, specifically in areas like foreign language skills and digital literacy. Investment in vocational training and certification is crucial.

Another challenge includes the need to improve the global ranking for tourist safety and comfort through better law enforcement and visitor management.

Lastly, tourist arrivals are highly concentrated, with Bali dominating over 45 percent of international visits, exacerbating the risks of overdevelopment there while hindering the growth of promising alternative regions.

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