The Global Minimum Tax (GMT) forms a central pillar of the OECD/G20 BEPS 2.0 initiative under Pillar Two. It is designed to ensure that multinational enterprises (MNEs) pay a minimum effective tax rate of 15% in every jurisdiction in which they operate.

While widely recognized as a step toward improving global tax fairness, GMT presents complex implications for developing economies such as Indonesia—offering both opportunities and structural challenges.

For many developing countries, GMT creates the potential for increased tax revenue by limiting profit shifting to low-tax jurisdictions. This strengthens fiscal capacity and supports public investment.

However, these benefits are accompanied by significant policy trade-offs. Traditional tax incentives—such as tax holidays—lose effectiveness under GMT, as MNEs may still be subject to top-up taxes if their effective tax rate falls below the minimum threshold.

GMT implementation also presents administrative challenges. Its complexity requires advanced tax administration systems, skilled human resources, reliable data infrastructure, and effective dispute resolution mechanisms—particularly during early implementation phases.

As a G20 member and a key emerging economy, Indonesia has historically relied on fiscal incentives to attract foreign direct investment. The issuance of Ministry of Finance Decrees No. 69 and 136 of 2024 establishes the domestic legal framework for Pillar Two implementation and its interaction with existing incentive regimes.

To remain competitive, Indonesia may need to shift its investment strategy away from tax-based incentives toward substance-driven policies—such as infrastructure development, workforce capability, regulatory efficiency, and legal certainty.

Conclusion

GMT represents a transformative shift in international tax architecture. For developing economies, it presents an opportunity to enhance revenue while challenging established investment strategies. With careful policy design, institutional readiness, and international coordination, GMT can serve not only as a compliance mechanism but also as a driver of sustainable and equitable economic growth.

Ichwan Sukardi & T Qivi Hady Daholi, Tax Practice