Purbaya: Tax Cuts Disposable Income, Spending Efficiency Drives

Jakarta, October 28, 2025 – Finance Minister Purbaya Yudhi Sadewa said that imposing taxes reduces disposable income, the portion of earnings that households can spend. He made the comment at the 100 Indonesian Economists Forum on Tuesday, October 28, 2025.

He noted that while taxes lower disposable income, the effect on economic growth is not automatic because it depends on how efficiently the government spends the revenue. Tax money that remains idle instead of being directed to productive activities hampers consumption (C), investment (I), and government spending (G) in the GDP equation Y = C + I + G + (X‑M).

Purbaya added that rapid allocation of tax funds to productive programs can act as a fiscal stimulus, boost liquidity, and raise private‑sector confidence. He pledged to monitor budget absorption and will only raise taxes when economic growth exceeds 6 %.