Study on the Implementation of the Average Effective Rate (TER) of Income Tax Article 21

Abstract

The enactment of Government Regulation No. 58 of 2023 concerning the withholding rates of Article 21 Income Tax on income derived from employment, services, or activities by individual taxpayers introduces a simplified approach to the technical calculation and administrative procedures of tax deductions. This study aims to evaluate the effectiveness of the regulation’s implementation and to identify potential challenges arising from the transition in calculation methods. The findings are intended to inform recommendations, preventive strategies, and planning measures to mitigate foreseeable issues. The research involves collecting data on salaries, wages, and honorariums paid to permanent employees throughout 2024. Using this dataset, Article 21 Income Tax is calculated and compared across periods using both the Traditional Progressive Rate and the Average Effective Rate (TER) method.