Indonesia's tax authority dispute with indie game publisher Toge Productions has exposed a structural threat to the country's gaming industry, as Malaysia, Singapore, and Thailand offer tax incentives that could drain creative talent from Southeast Asia's largest market.

Toge Productions, the Jakarta-based studio behind hits like Coffee Talk and A Space for the Unbound, revealed this week that Indonesia's Directorate General of Taxation (DJP) demanded back taxes after reclassifying employee salaries during game development as capitalized assets rather than operating expenses.

The technical dispute centers on accounting standards PSAK 19, Indonesia's version of IAS 38, which governs intangible asset treatment. The DJP argues that salaries paid during multi-year game development should be recorded as assets that depreciate over time, not expensed immediately. That reclassification increases taxable income in development years, triggering penalties for underpayment.

Kris Antoni, Toge's founder, went public with the dispute on social media after requesting a tax refund for overpayment, only to face a counter-claim for additional taxes owed. The amount involved has not been disclosed, but the principle threatens Indonesia's entire indie gaming sector.

The controversy erupted into a broader industry debate when Shieny Aditya, CEO of Agate—Indonesia's largest game development company—defended the tax treatment on social media. Aditya's comments sparked backlash from indie developers who noted that Agate's business-to-business model insulates it from the cash flow pressures that capitalization rules impose on studios creating original intellectual property.

Agate earns revenue from corporate clients commissioning advergame projects, training simulations, and outsourcing work. Client contracts provide predictable cash flow and cover development costs upfront. Toge and similar indies spend years developing games with no guaranteed revenue, funding operations from previous releases or investor capital while new titles remain works-in-progress.

Capitalizing development costs in that environment means higher taxable income when studios are cash-flow negative, forcing them to pay taxes on "profits" that do not yet exist as cash. If the game fails commercially, the studio has already paid taxes on capitalized salary costs that never generated revenue.

Malaysia's tax regime offers a sharp contrast. The country provides 0 percent tax on intellectual property income for qualifying creative industries, plus double deduction for research and development expenses. A Malaysian studio developing the same game as Toge could potentially pay zero corporate tax on revenue while deducting 200 percent of development costs from other income.

Singapore offers similar advantages through its Productivity and Innovation Credit scheme, Development and Expansion Incentive, and IP development incentives. Game studios can deduct up to 250 percent of qualifying development expenses and access grant funding from the Infocomm Media Development Authority.

Thailand positions itself as the regional gaming hub with Board of Investment incentives including eight-year corporate income tax exemptions, import duty waivers on equipment, and permission for majority foreign ownership in incentivized sectors.

The competitive gap has already triggered migration. According to industry discussions on Indonesian developer forums, several mid-sized studios have established Singapore or Malaysian entities to house their IP while maintaining Indonesian development teams. That structure keeps jobs in Indonesia but shifts profits and taxes abroad.

Indonesia's gaming industry generated approximately $2.3 billion in revenue in 2025, according to Newzoo, making it Southeast Asia's largest market by consumer spending. But most revenue comes from mobile games developed by international publishers like Tencent, Garena, and Moonton. Domestic studios capture a fraction of that value.

Indie developers like Toge represent Indonesia's best chance at building globally competitive IP that generates long-term revenue and exports Indonesian creative content. Coffee Talk sold more than 600,000 copies worldwide. A Space for the Unbound launched to critical acclaim in 2023 after seven years in development. Those successes showcase Indonesian storytelling and aesthetics to global audiences.

But seven years of capitalized development costs under PSAK 19 means seven years of tax liability before the first sale. Few Indonesian indies can absorb that burden, especially when neighboring countries actively court them with zero-tax or negative-tax regimes through deductions exceeding 100 percent.

The DJP has not publicly explained its interpretation of PSAK 19 or why it rejects Toge's accounting treatment. The ministry's silence leaves studios uncertain whether they face similar audits and penalties.

Indonesian developer communities on Discord and Reddit reacted with alarm. Many noted that Malaysia's tax incentives specifically target gaming, animation, and digital content sectors that Indonesia claims to prioritize under its "digital economy" development plans.

The dispute also exposes the gap between Indonesia's creative sector ambitions and its tax policy execution. President Prabowo Subianto's government has emphasized creative economy development, pledging support for domestic IP creation and digital exports. But the DJP appears to lack guidance on how tax treatment should align with those objectives.

For ASEAN economic integration, the episode illustrates how tax competition can fragment regional industries. Southeast Asia's gaming developers could form a cohesive ecosystem where Indonesian scale combines with Singaporean infrastructure and Malaysian incentives. Instead, they compete for talent, capital, and corporate domiciles in a race where Indonesia's size advantage erodes against neighbors' targeted policies.

Ten countries, 700 million people, one region—and Indonesia risking its creative industries because neighbors wrote better tax codes.