Indonesian labor union leader Purbaya has publicly addressed the controversy surrounding the taxation of Jaminan Hari Tua (JHT) withdrawals, a policy that has sparked widespread debate among workers and financial analysts. According to a statement released by the Federation of Indonesian Workers’ Unions (FSPMI) on June 25, 2026, the proposal to tax JHT funds upon withdrawal contradicts the original purpose of the social security program, which was designed to provide financial stability for retirees.
The dispute centers on a recent directive from the Ministry of Finance, which clarified that JHT payouts—intended as a lump-sum benefit for workers retiring or leaving their jobs—would be subject to income tax. This decision, outlined in a June 22, 2026, press release, has drawn criticism from labor advocates who argue that the tax disproportionately affects low- and middle-income workers. “This policy feels like a betrayal of the very people it was meant to protect,” Purbaya said in a press conference, citing data from the Central Statistics Agency (BPS) that shows a significant portion of JHT recipients earn below the monthly tax threshold of Rp4.5 million (approximately Rp4.5 million).
The Tax Controversy Surrounding JHT Withdrawals
JHT, part of Indonesia’s BPJS Ketenagakerjaan system, requires employers and employees to contribute a percentage of monthly wages each. Historically, these funds were exempt from taxation, but the 2026 policy shift has reignited discussions about the program’s financial sustainability. The Ministry of Finance’s explanation, published in CNBC Indonesia, states that taxing JHT withdrawals aligns with broader efforts to increase state revenue amid rising public spending. However, critics argue that the policy fails to account for the program’s role in preventing poverty among retirees.
A June 2026 study found that a significant portion of JHT recipients use the funds to cover immediate expenses like healthcare or housing, with a portion reporting that the tax would force them to delay retirement. "Taxing retirement savings at a time when inflation is at a 15-year high is counterproductive."
Economic Implications for Workers
The taxation policy has also drawn comparisons to similar measures in other Southeast Asian countries. In Malaysia, for example, JHT-style savings accounts (known as KWSP) are taxed only if withdrawals exceed a certain threshold, a
