The Impact of Income Tax Facility Policies on Investment in Specific Business Sectors and Tax Allowances: The Case of Indonesia

DOI

10.2991/978-94-6463-692-5_12How to use a DOI?

Keywords

Investment; Unemployment; Economic Geography

Abstract

Government Regulation Number 78 of 2019 in Indonesia, which provides income tax facilities (tax allowance) for investments in specific business sectors or regions, is evaluated in this study for its effects on community welfare and regional economic growth. The study uses a quantitative methodology to assess the effects of economic and geographic factors on changes in open unemployment rates and economic growth before and after the policy’s implementation. It examines the disparate impacts of the 2019 tax allowance policy on provincial unemployment rates, economic growth, and regional investment distribution. The analysis includes data on domestic and foreign investments, unemployment, and economic growth from 34 provinces. Spatial analysis revealed that West Java had the highest foreign investment before the policy, while West Sulawesi had the lowest. This distribution remained unchanged after the policy. Maluku experienced the highest economic growth following the policy, while Bali had the lowest. Between 2019 and 2021, twelve provinces, mostly in Sulawesi, saw economic growth rates above the national average of 2.6%, while 22 provinces, primarily in Papua and Nusa Tenggara-Bali, had growth rates below this average. Banten had the highest unemployment rate before the policy, and Bali the lowest. After the policy, West Java had the highest unemployment rate, while West Sulawesi had the lowest. The results imply that Indonesia’s tax allowance policy has affected regional investments, economic growth, and unemployment rates.

Copyright

© 2025 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Darol Arkum
AU  - Mudrajad Kuncoro
AU  - Ghardapaty Ghaly Ghiffary
PY  - 2025
DA  - 2025/05/01
TI  - The Impact of Income Tax Facility Policies on Investment in Specific Business Sectors and Tax Allowances: The Case of Indonesia
BT  - Proceedings of the 12th Gadjah Mada International Conference on Economics and Business (GAMAICEB 2024)
PB  - Atlantis Press
SP  - 217
EP  - 233
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-692-5_12
DO  - 10.2991/978-94-6463-692-5_12
ID  - Arkum2025
ER  -