Tax Strategy as an Alternative to Tax Incentives to Stimulate Investment in the Global Minimum Tax Era in Indonesia

Amelia Cahyadini (), Prita Amalia and Fahriza Fahriza
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Amelia Cahyadini: Faculty of Law, Universitas Padjadjaran, Bandung 40132, Indonesia
Prita Amalia: Faculty of Law, Universitas Padjadjaran, Bandung 40132, Indonesia
Fahriza Fahriza: Faculty of Law, Universitas Padjadjaran, Bandung 40132, Indonesia

Laws, 2025, vol. 14, issue 5, 1-15

Abstract: Digital transformation has been accelerating the development of the global tax landscape, giving multinational companies the potential to generate revenue from certain jurisdictions without any physical presence in the relevant countries. This condition has triggered global initiatives aiming to prevent cross-jurisdictional tax evasion through the Global Minimum Tax (‘GMT’) consensus. This study will discuss how tax incentive policies in Indonesia can face the challenges brought by GMT while guaranteeing a good business climate for foreign investors. A normative research method alongside a descriptive and comparative approach will be used to analyze regulations and tax policies on investment in Japan and Vietnam, highlighting learning opportunities for Indonesia. The results of our research show that Japan and Vietnam still use tax incentives as a means to attract foreign investors, but only as additional factors. In contrast, the a quo condition in Indonesia shows an attachment to tax incentives as the main stimulus of investment, despite Indonesia’s natural resources, human resources, and existing markets having the potential to become the main capital drawing interest from foreign investors. Furthermore, the adoption of GMT in Indonesia is currently at the ministerial regulation level and is still considered insufficient, since it is not in line with the hierarchy of law, both in terms of legal norms and the principle of legality in taxation. Thus, Indonesia needs to immediately shift its focus to alternative incentives and ensure the integration of GMT into the national law through the reformation of policies and rules and regulations concerning taxation and investment.

Keywords: Indonesia; investment; policies; global minimum tax; regulation (search for similar items in EconPapers)
JEL-codes: D78 E61 E62 F13 F42 F68 K0 K1 K2 K3 K4 (search for similar items in EconPapers)
Date: 2025
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