What legal steps are required to implement Tax Increment Financing for an urban redevelopment project in Indonesia?

Because Tax Increment Financing (TIF) is not explicitly regulated under Indonesian law, any financing based on projected tax increments must follow the existing legal framework, particularly those governing regional financing, government cooperation schemes, and the management of regional assets and taxes. To implement TIF in Indonesia, a city must obtain approvals from the central government and the Regional House of Representatives (DPRD), establish a local legal basis (Perda), prepare prudent tax forecasting supported by strong financial safeguard mechanisms, and ensure oversight and transparency to protect taxpayers’ interests. With a robust governance structure in place, TIF can serve as an alternative financing mechanism for development without directly burdening the regional budget (APBD).