Jakarta, The PRAKARSA - PRAKARSA assesses Indonesia's tax ratio target in the 2045 RPJP is still too low. In the final draft document for the 2025–2045 RPJPN recently released by Bappenas, the government sets a target of a tax-to-GDP ratio of 18–20% in 2045.
"Indonesia lacks the courage to set a higher tax ratio target in 2045, the value is only equivalent to the realized tax ratio in developed countries in 2023 and is still relatively low compared to countries in the region and other developing countries," said Ah Maftuchan, Executive Director of The PRAKARSA
The Organization for Economic Co-operation and Development of Developed Countries (OECD) in 2021 has recorded an average tax ratio of 33,5%. The OECD can be used as a reference because they have set high standards for the economic policies of high-income countries, where Indonesia is projected to enter this class in 2045.
Referring to conditions in recent years, the tax ratio is still only around 10-11 percent of GDP. This reflects the dependence of Indonesia's income from other sources such as debt which is of course very burdensome and tends to be unstable. It is also feared that funding from continuous debt will affect the independence and sovereignty of the Indonesian nation.
Therefore, in the long run, a higher tax ratio will provide the government with fiscal stability. From this fiscal stability, it is hoped that it will encourage social and economic stability as a result of the redistribution of tax proceeds to the poor and vulnerable groups of people.
“However, high tax ratio levels are prioritized to ensure that the government has sufficient revenue sources to finance vital public expenditures such as infrastructure, education, healthcare, security, and social programs.” Maftuch added.
The target ratio stated in the draft RPJPN is not enough if Indonesia wants to become a developed country in 2045. Learning from developed countries that have high tax ratios, they implement a progressive tax system and still have high compliance. A progressive tax system helps the government collect effective taxes from people according to their income level.
There are a number of ways the government can do in the next 20 years to increase this tax ratio.
"Indonesia's tax ratio can be higher by expanding the tax base, optimizing sectoral taxes including combating tax evasion and expanding new tax alternatives such as taxes for the rich," added Samira, Researcher at The PRAKARSA.
One form of expanding the tax base is increasing bracket for taxes for people with high income or consumption. The existing base is considered relatively limited and there is still a lot of room to be explored.
In addition, the government can boost the optimization of taxation of potential sectors to take advantage of the momentum of global development. In the next few years, global development will be directed towards a sustainable economy.
Indonesia has the advantage of several extractive commodities that support sustainable industries in very large quantities, such as nickel ore, bauxite, copper and other minerals. With the downstream mineral commodity policy, it is hoped that state revenue through the export of processed goods can increase dozens of times rather than relying on trade in raw materials.
With this, the government can also practically focus on increasing revenue from the natural resource sector which still has a relatively low tax contribution.
Based on the 2025-2045 RPJPN draft document, the government needs to initiate another tax instrument. This new document calls initiation sin tax and carbon tax, while there are other taxes such as property tax and inheritance tax that have the potential to be reviewed and implemented.
Indonesia itself has experience of exceeding revenue targets in tax realization. This can be a provision in the future to set a higher tax target.
Law enforcement will be one of the keys to achieving the target of a higher tax ratio. This targets the practice of tax collection, business activities, to the distribution of tax proceeds.
"In the aspect of tax collection, the government must establish a strong system in identifying tax subjects along with the amount of tax to be paid. So far, there are still many cases of potential tax subjects, both individuals and corporations, who commit significant tax evasion and evasion, or even escape tax payment obligations.” Maftuch said.
"In business practice, the government must close regulatory loopholes so that companies can be administratively orderly. In the future, there will be no more corporations that manipulate prices, financial reports, or business-related documents that have the potential to reduce potential tax revenues. In addition, there must be firm efforts by law enforcement officials to reduce trading activities and the export of illegal commodities which are very significant losses to the state.” Maftuch added.
"What also needs attention, the government is obliged to ensure the effectiveness of the allocation and distribution of tax revenues. This is very important considering that the distribution of taxes by the government will greatly affect the participation and level of taxpayer compliance. With effective distribution in the long term, this will further incentivize them to actively contribute to developments that benefit the public in general." Samir closed.