Unequal global tax policies have posed significant fiscal challenges for Indonesia and many developing countries. Indonesia's tax ratio, at only around 10% of GDP, is far below the regional average, limiting the country's ability to finance priority development programs. This challenge is exacerbated by multinational corporate tax avoidance practices and illicit financial flows (IFFs), which result in the loss of billions of dollars in potential revenue annually. The existing international tax architecture is considered unfair and tends to favor developed countries.
In response to this situation, the United Nations (UN) adopted the UN Tax Convention, a more inclusive global tax cooperation framework. This convention, whose substantive negotiations will continue until 2027, offers strategic opportunities for Indonesia. Its potential benefits include strengthening fiscal space by expanding the tax base, particularly from the rapidly growing digital economy, and curbing tax avoidance practices through enhanced transparency and cross-border information exchange, including beneficial ownership data.
However, to maximize the benefits of this convention, Indonesia faces several key challenges. Globally, the voices of Asian countries remain fragmented, in contrast to the more cohesive African bloc. Technically, Indonesia remains constrained by limited cross-jurisdictional data access, institutional capacity, and the risk of unfair dispute resolution mechanisms that could undermine fiscal sovereignty.
Through this policy brief, The PRAKARSA recommends that Indonesia take a more proactive role. Strategic steps that can be taken include leading the consolidation of Asian countries' positions, prioritizing national strategic issues such as digital economy taxes and global wealth taxes, strengthening cross-border transparency, and advocating for a balanced dispute resolution mechanism. In this way, Indonesia can champion a fair global tax system and support sustainable development financing.
Read the full Policy Brief volume 54 entitled "Guarding Indonesia's Interests in UN Tax Convention Negotiations" below: