Tax is the main instrument in supporting economic and social development in Indonesia. Although its contribution to the State Budget (APBN) is quite large, the national tax system still faces serious challenges such as low compliance, policy complexity, and inequality in tax burden. The low ratio of tax to Gross Domestic Product (GDP), which since 2008 has not shown significant improvement and even tends to decline, is an indicator of weak domestic resource mobilization. Dependence on debt to cover the budget deficit also increases fiscal risk and reduces state spending space.
This white paper was prepared in response to the urgency of tax reform in Indonesia. This document reviews various factors that influence low tax revenues, including less selective incentive policies and less than optimal expansion of the tax base. On the other hand, the potential for untapped tax revenues is still very large, as indicated by the significant tax-revenue gap. Therefore, increasing the tax ratio must be done not only to strengthen the country's fiscal capacity, but also to finance long-term development needs such as infrastructure, education, and social protection.
This white paper also emphasizes the importance of the role of Civil Society Organizations (CSOs) in encouraging fairer and more transparent tax reforms. Through education, policy advocacy, and public oversight, CSOs are expected to contribute to creating a tax system that is accountable and supports social justice. The policy recommendations in this document aim to provide data-based options and are oriented towards improving the tax structure, both in terms of regulation and administration, so that the tax system in Indonesia can be more effective, inclusive, and sustainable.