Legal Analysis of Government Regulation No. 20 of 2026 Concerning Adjustments to Income Tax Regulations for Micro, Small, and Medium-Sized Business Taxpayers

Rr. Adeline Melani; Eddie I. Doloksaribu

doi:10.59141/jiss.v7i8.2524

Authors

Rr. Adeline Melani Universitas Katolik Indonesia Atma Jaya, Jakarta
Eddie I. Doloksaribu Universitas Katolik Indonesia Atma Jaya, Jakarta

DOI:

https://doi.org/10.59141/jiss.v7i8.2524

Keywords:

PP 20/2026, MSMEs, Tax Principles Legal Certainty, Indexation, Coretax

Abstract

Government Regulation Number 20 of 2026 concerning Adjustments to Income Tax Regulations for MSMEs extends the 0.5% Final Income Tax incentive. However, from a normative perspective, this regulation contains four juridical defects that contradict Adam Smith’s four principles of taxation. This study employs normative legal research using statutory, conceptual, and comparative approaches. The findings reveal that, first, Article 57 creates a legal vacuum for cooperatives after four years, violating the principle of legal certainty. The case study of the “Makmur Sejahtera” Cooperative demonstrates that this uncertainty resulted in the cancellation of an IDR 800 million investment due to increased bank risk premiums. Second, the stagnation of the IDR 4.8 billion threshold for 13 years without an indexation mechanism breaches the principle of justice. With cumulative inflation of 35.2%, the real value of the threshold is now only IDR 3.55 billion, causing 220,000 MSMEs to experience “pseudo-graduation” and income-splitting practices. Third, the limitation of tax subjects to individuals and cooperatives contradicts Law No. 20 of 2008 and Article 28D(1) of the 1945 Constitution by violating the principle of horizontal equity. The case of two pharmacies in Bekasi demonstrates an eightfold difference in tax burdens. Fourth, the implementation of Coretax increases compliance costs by 42% and violates the principle of simplicity. Data from three regions indicate that 62% of MSMEs hire tax consultants. This study recommends revising the regulation by introducing transitional provisions, establishing an automatic three-year indexation mechanism, eliminating entity-based discrimination through a phased-out system, and launching Coretax Lite. MSME tax policy must be growth-oriented and inclusive to prevent it from becoming a new barrier to business development.

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