Indonesia's tax revenues are much lower than other countries of similar economic level. The ratio of tax revenue to Gross Domestic Product (GDP) is only around 12%. In fact, the average tax revenue for countries that are included in the lower middle income group, such as Indonesia, is 19%. Indonesia's tax ratio is even below the average for poor countries (low income) which has reached 14,3%.
In the 2012 State Revenue and Expenditure Budget (APBN), Indonesia's tax revenue is projected to reach Rp 1.033 trillion. Based on the category of middle-income countries, with this number, the country actually lost a tax potential of around IDR 512 trillion or almost 50%. Conservative estimates of the International Monetary Fund (IMF), the potential lost tax is also more than 40%.
The inability to optimize tax revenue causes debt to continue to be “sustainable”. The amount of new debt is almost always greater than the debt installments. The accumulated debt will reach Rp 1.937 trillion this year, meaning that every Indonesian resident bears a debt of Rp 8 million. Debt to GDP ratio below 30% does not mean it is safe if the tax ratio continues to be low. The accumulation of debt and low income will bring Indonesia into a debt trap
Taxes are the largest source of revenue in the State Budget (APBN). In 2012, the projected tax revenue will contribute Rp 1.033 trillion or almost four-fifths of state revenue. Even though it looks big, the revenue is actually still low in terms of the value of the tax-to-GDP ratio. The tax ratio is a measure to assess the government's ability to collect taxes. In general, more developed countries have higher tax ratios.
Indonesia's tax ratio is still around 12% of GDP. This ratio is included in the low category, when compared to equivalent countries. Indonesia is now included in the category of lower middle income countries and the average tax ratio for countries in this category is 19%.1 The tax collection capacity in Indonesia is even worse than the average tax ratio for low income countries. which reached 14,3% (see graph 1).
Indonesia's tax revenue ratio, which is lower than the average for poor countries, indicates a fundamental problem in tax collection capacity. However, viewed from a positive perspective, if this problem is resolved, the potential for tax revenue in Indonesia is very high.