Jakarta, The PRAKARSA – The Indonesian Fair Tax Forum (FPBI) held a discussion entitled “Fair Tax Policy Proposal: Institutional Reform, Tax Base, and Redistribution”. This activity also marked the launch of white paper as a form of policy recommendation to the government and all stakeholders to strengthen Indonesia's taxation system to be fairer, more transparent, and more sustainable. Held at the Ashley Wahid Hasyim Hotel, Jakarta, on Tuesday (27/05/2025).
Ah Maftuchan, Executive Director of The PRAKARSA and also the Coordinator of FPBI, emphasized the importance of institutional reform and expansion of the tax base as fundamental steps to improve Indonesia's tax system.
"Institutional reform is very important. If we want a more fundamental reform, then we must carry out institutional reform, and it must be manifested in the form of a state revenue institution, as is President Prabowo's agenda. If this is done, it will have a direct impact on improving Indonesian taxation," he said.
According to him, institutional reform is the key to creating a more efficient and accountable tax system. He also encouraged this reform to be in line with the current government's vision.
In addition to institutional reform, Maftuchan also highlighted the importance of expanding the tax base and the issue of tax redistribution for the welfare of the people. He emphasized that expanding the tax base must be balanced with a fair redistribution policy, so that the benefits of tax revenue can be felt by all levels of society, especially the groups most in need.
Regarding the expansion of the tax base, Yenti Nurhidayat from the Indonesian Center for Legal and Budget Studies (PUSKAHA) in her presentation said that there are 2 major problems in the taxation system in Indonesia. First, tax policy. Second, related to tax administration.
Yenti Nurhidayat highlighted that Indonesia's tax posture is still highly dependent on Income Tax (PPh) and Value Added Tax (PPN). She explained that over the past ten years, PPh contributed more than 49% to total tax revenue, with a peak of 52,6% in 2016. Meanwhile, PPN contributed a minimum of 33%, with the highest contribution of 37,1% in 2024.
According to Yenti, the government has not been optimal in utilizing the tax potential of the mining industry and the super-rich. Although the mining sector contributed 8,78% to GDP, its tax revenue was only 2,49% in 2023. She proposed the implementation of a coal production tax and a windfall tax to increase state revenue. In addition, she criticized the absence of a regulatory framework to impose special taxes on the super-rich, even though this initiative had been discussed at the 20 G2024 Summit.
For example, Yenti refers to Spain's policy of implementing a progressive wealth tax. "For example, wealth above a certain threshold is subject to rates ranging from 0,5% to 3,5%. Indonesia needs to consider similar instruments to broaden the tax base and improve fiscal fairness. This step is important to reduce dependence on income tax and VAT while encouraging greater contributions from high-income groups," he said.
Meanwhile, Lalu Hendri Bagus from Transparency International Indonesia (TII) added that transparency and accountability in the use of tax funds are the main foundations for building a fair and sustainable taxation system.
In his presentation, he stated that strengthening fiscal transparency can increase voluntary compliance of taxpayers (voluntary tax compliance) and the legitimacy of tax policy. "Tax reform should not stop at collection, public trust is built when the public sees tax funds being used responsibly," he said.
Hendri also identified a number of challenges, such as limited access to fiscal information, low public participation in budget formulation, and weak mechanisms for monitoring the allocation of state funds. He also highlighted the rampant corruption and the gap in perception between tax contributions and benefits felt by the public. "Without transparency and active public participation, efforts to expand the tax base will not be balanced by an increase tax morale, "he said.
Although the number of registered taxpayers has increased by 33% since 2020 to 69,1 million people in 2023, Hendri noted that this has not been accompanied by an increase in trust in tax institutions. He emphasized the need for concrete steps, such as strengthening the monitoring mechanism and information transparency, to ensure that tax funds are managed accountably. "The increase in the quantity of taxpayers must be in line with an increase in the quality of governance," he said.
At the end of the presentation, Hendri also explained various FPBI recommendations in white paper entitled “Tax Reform Agenda: The Path to Tax Justice and Economic Equality”. The recommendations include, first, the government needs to carry out a digital transformation of the tax system by developing a mobile-based application integrated with the banking system to facilitate reporting, payment, and access to real-time information. Second, Indonesia must be active in international negotiations, especially in the formulation of the UN Tax Convention, to minimize tax avoidance practices by super-rich individuals and global corporations. Third, increasing the capacity of tax apparatus human resources through continuous training is very important to master the latest tax technology and policies.
Fourth, the accountability of tax officials must be improved through periodic internal audits and a transparent performance assessment system. Fifth, the Ministry of Finance needs to prepare a measurable tax reform action plan with clear performance indicators, in line with national development goals. Sixth, the revision of progressive tax rate policies, including the imposition of wealth tax on high-income individuals and the offsetting of VAT increases with the expansion of the tax base for the super-rich, is a crucial step to create tax justice.
Seventh, public participation must be facilitated through consultation forums involving civil society, business actors, and experts in the formulation of tax policies. Eighth, the establishment of a special task force for tax avoidance action, equipped with the latest technology, will strengthen law enforcement. Ninth, transparency of tax data must be improved through regular reporting on performance and policy evaluation that is accessible to the public. Tenth, synergy between the Directorate General of Taxes and the Central Statistics Agency needs to be strengthened to compile tax compliance analysis per sector as a basis for data-based policy making.
The Fair Tax Forum emphasizes that tax reform requires multi-stakeholder collaboration, involving the government, the House of Representatives, the private sector, academics, and civil society. The implementation of these recommendations must be accompanied by regular monitoring to ensure their impact on social justice and economic growth. We invite all parties to work together to realize a fair, transparent, and welfare-oriented taxation system.
The Fair Tax Forum is a civil society coalition committed to promoting fair and welfare-oriented tax policies. FPBI members include The PRAKARSA, Publish What You Pay (PWYP) Indonesia, Transparency International Indonesia (TII), Lokataru, FITRA National Secretariat, Celios, Puskaha, Aksi, Indonesia for Global Justice (IGJ), and Trend Asia.