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Exa: cnbcindonesia.com
Exa: cnbcindonesia.com
Bali Zero handles visas, company setup, tax and property compliance in Indonesia. Ask us directly on WhatsApp.
Chat with Bali Zero on WhatsApp**Indonesia's Makan Bergizi Gratis (MBG) program — the signature policy of President Prabowo Subianto's administration — has become a flashpoint in the **
Indonesia's Makan Bergizi Gratis (MBG) program — the signature policy of President Prabowo Subianto's administration — has become a flashpoint in the country's tax policy debate. Critics and lawmakers are raising alarms that the program's rollout may be eroding state tax receipts, either through formal exemptions granted to MBG suppliers, informal arrangements that sidestep normal tax obligations, or the administrative complexity of managing a program that funnels hundreds of billions of rupiah through a sprawling network of local kitchen operators and food vendors.
At the center of the controversy is a letter reportedly issued by the former chief of the Badan Gizi Nasional (BGN), the state body tasked with overseeing the free meals program. The letter has attracted scrutiny from parliamentarians and observers who question whether it authorized tax treatment for MBG-related transactions that departs from standard rules — potentially reducing VAT collection or granting income tax reliefs that were never formally legislated.
The concern is structural. MBG operates at massive scale, with the government targeting tens of millions of school-age children and pregnant women as beneficiaries. Funding the program requires significant budget allocation — estimates have placed its annual cost in the range of IDR 70–80 trillion — and any leakage in the tax chain along the supply route compounds the fiscal burden. If vendors supplying ingredients or logistics to BGN-affiliated kitchens are operating outside the normal VAT net, the Directorate General of Taxes (DJP) stands to lose revenue on what is one of the largest public procurement ecosystems in the country's recent history.
The DJP and the Ministry of Finance have not, as of available reporting, formally confirmed or quantified the extent of any revenue shortfall attributable specifically to MBG. However, Indonesia's overall tax ratio remains below regional peers, and the government has repeatedly set ambitious tax revenue targets in its annual state budgets. Any structural exemption or compliance gap in a program of MBG's scale creates measurable pressure on those targets.
The scrutiny of the former BGN chief's letter adds a governance dimension to the fiscal debate. If the letter granted or implied tax benefits outside the normal legislative process — without a formal Government Regulation or Ministerial Decree from the Ministry of Finance — it would raise questions about the legal basis for those benefits and whether vendors who relied on the letter are now exposed to reassessment.
This story is a useful reminder that Indonesia's largest social programs are not fiscally neutral events — they reshape who pays, who is exempt, and how aggressively the DJP pursues revenue elsewhere.
When a program the size of MBG creates ambiguity in the tax chain, the government's natural response is to tighten enforcement in areas it can control. That often means heightened scrutiny of PT PMA
compliance, more rigorous VAT audit cycles, and reduced tolerance for grey-area arrangements that might have gone unquestioned in a period of fiscal comfort.
For our clients in the food, catering, and hospitality supply chain, the more immediate question is whether any MBG-adjacent exemption or procurement contract they participate in is built on solid legal footing. A letter from a former agency head, however senior, is not the same as a Peraturan Menteri Keuangan. If the government ultimately rules that the letter had no legal force, businesses that structured their tax treatment around it may face reassessment.
More broadly, this is a moment to review your company's VAT registration status, transfer pricing documentation, and any informal understandings with procurement partners. Fiscal pressure at the national level has a way of migrating downward into audit activity.
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