Introduction
Land is an invaluable resource in Indonesia, serving not only as the foundation for residential and commercial infrastructure but also as a critical investment avenue. However, the accumulation of unused or "idle" land---often held for speculative purposes---has led to increased land prices, making it difficult for many Indonesians to afford property. To combat these issues, Indonesia has introduced a progressive tax on idle land. This policy aims to curb land speculation, reduce inequality in land ownership, and encourage productive land use. Let's explore how Indonesia's progressive tax policy on idle land works and what impact it could have on the country.
Why Focus on Idle Land?
In many Indonesian cities, especially in the capital city of Jakarta, large portions of land remain unused. Speculators and investors purchase land, hold onto it without developing it, and wait for its value to increase. This practice restricts land availability, drives up prices, and can lead to unsustainable urban expansion. For the general population, this makes land acquisition increasingly difficult, particularly for lower- and middle-income families. Idle land also contributes less to the local economy and may hinder infrastructure projects that require accessible land.
What Is a Progressive Tax on Idle Land?
The progressive tax on idle land is structured to impose higher tax rates on land that remains undeveloped over time. The idea is straightforward: the longer a parcel of land remains idle, the higher the tax rate applied to it. This progressive tax rate increases as time passes, pressuring landowners to either develop or sell the land rather than leaving it idle.
Legal and Policy Framework
Indonesia's approach to taxing idle land includes both national legislation and regional regulations. Governor Regulation No. 41 of 2019, issued by the government of DKI Jakarta, is an example of local-level regulation that tackles idle land within the city's main areas. This regulation mandates that property taxes for idle land along key Jakarta roads can be increased by up to 200%. The aim is to encourage owners to use the land or convert it to productive green spaces.
Furthermore, the country's overarching tax policies, such as the Regional Taxes and Regional Levies Law (Law No. 28 of 2009), support progressive land taxation by empowering local governments to set tax rates on property, including idle land. Under this framework, local authorities can impose incremental tax rates depending on land conditions, ownership patterns, and market demand.
 How the Progressive Tax Is Applied
The progressive tax on idle land considers several factors to determine the rate, including:
1. Land Ownership Duration: The length of time the land has remained idle influences the tax rate, with higher rates applied as time passes without development.
2. Location and Type of Land: Idle land in prime areas, such as those along main city roads, is subject to higher tax rates. This policy is intended to encourage the productive use of high-value land, especially in densely populated urban areas.
3. Purpose of Ownership: Land owned by individuals or entities for investment purposes may be taxed differently based on whether it is utilized, supporting a distinction between speculative holdings and legitimate business operations.
By implementing these factors, the progressive tax framework can effectively encourage landowners to develop their property or sell it to those who will.
 Potential Impact of the Progressive Tax on Idle Land
