Priority sectors for tax incentives after the Global Minimum Tax

Since 1 January 2025, Finance Ministry Regulation 136/2024 has applied the DMTT and IIR to multinational groups with consolidated revenue of at least EUR 750 million; the UTPR followed in 2026. The tax authority counts 722 groups in scope. The consequence for tax incentives is direct: if an entity’s effective rate in Indonesia falls below 15%, the shortfall is collected as top-up tax, and the DMTT makes sure Indonesia collects it first.

Take an MNE subsidiary with GloBE income of 100. A full tax holiday waives 22 of corporate income tax, but the DMTT takes 11 back. What the investor actually keeps is about 11: 7 from the gap between the 22% statutory rate and the 15% floor, and about 4 from income sheltered by the substance-based income exclusion. That is still more than simply cutting the rate to 15%, so the approach in Regulation 69/2024 (grant the holiday and let the DMTT collect the excess) remains a legitimate option. Beyond that limit, an incentive only shifts revenue, either to another country or back to the treasury.

Before turning to sector selection, there are four reasons not to rush into more tax expenditure. First, early OECD evidence (2026) shows the minimum tax raised effective rates for in-scope groups by about 1.4–1.7 points with no negative effect on investment or employment in the first year; Ireland, which moved from 12.5% to 15%, recorded a record 323 new investments in 2025. Second, few firms in Indonesia are affected: the DMTT is expected to raise only Rp86 billion from three groups, while the largest potential (Rp4.4 trillion) comes from the IIR on foreign subsidiaries of Indonesian-parented groups. That gain is real, but it is no substitute for transfer pricing enforcement, since GloBE does not reach domestic groups, groups below EUR 750 million, or profits shifted to jurisdictions taxed at 15% or more. Third, take-up of existing incentives is already low: 36 taxpayers used the tax holiday in 2024 and only 12 have used the R&D super deduction, with layered administrative requirements. Fourth, investor surveys across countries consistently find incentives redundant for market- or resource-seeking investment; taxes decide only when other factors are equal.

Because Pillar Two sorts firms rather than sectors, a single sector may need two instruments: expenditure-based incentives (capex, R&D, payroll) designed to qualify as QTIs for in-scope MNEs, and ordinary tax holidays or allowances for investors outside scope. To choose the sectors I propose five filters: investment mobility, spillovers, Pillar Two exposure, instrument fit, and fiscal cost per job. In the 2020 I-O table, electronics turns out to have the weakest backward linkage among the candidates (0.91 against an average of 1) because it is dominated by assembly of imported components, while footwear has the highest wage multiplier (0.43) and exports 66% of its output. Smelters are export-oriented, but their investment is tied to the location of the ore, which calls for rent-capture instruments rather than incentives.

The recommendations: move from profit-based exemptions to expenditure-based incentives, tie conditions to spending or production rather than exports or local content so they do not invite WTO SCM disputes, and use QRTCs selectively, since a cash refund is a call on the budget rather than just a tax expenditure.