T

he next president must overhaul the tax office to increase state spending to ensure economic growth targets are met, a top official says.

The Finance Ministry'€™s taxation office director general Fuad Rahmany said that his office would need to double its current 30,000 employees workforce.

Other reforms are also required, including stronger legal support to allow the tax office to monitor bank accounts, he added.

According to Fuad, efforts to boost economic growth without undertaking tax reforms were wishful thinking, as the state would not have the finances to boost spending programs, unless it pulled in more debt and added to the soaring fiscal deficit.

'€œThe next president must know this: Without higher tax revenues collection, [economic programs] are nothing but dreams,'€ Fuad said late Thursday in his Jakarta office.

'€œBoth candidates proposed plans to increase the tax ratio to 16 percent '€” one even wanted to raise it to 20 percent. But how will those taxes be collected? The money doesn'€™t just fall from the sky,'€ he added.

At approximately 12 percent, the tax revenue-to-gross domestic product (GDP) ratio was among the lowest in the region, compared with 16.5 percent in Thailand, 16.1 percent in Malaysia and 14.5 percent in Singapore.

Presidential contenders Joko '€œJokowi'€ Widodo and Prabowo Subianto have pledged to increase spending to boost GDP growth, with the first arguing that 7 percent economic growth was achievable and the latter saying the economy could grow by at least 10 percent.

This year, the tardy collection of tax revenues combined with a swell in subsidy spending, forced the government to cut its ministry spending by Rp 43 trillion (US$3.58 billion) in the revised 2014 State Budget.

In the budget, the government slashed its non-oil and gas tax revenues collection target by Rp 45.6 trillion to Rp 988.5 trillion due to the bleak outlook of exports and the ongoing economic slowdown, which put pressure on local companies'€™ earnings.

Noting that the government had met its tax revenue collection target only two times over the past 12 years, Fuad said future tax reforms would be necessary.

The too-narrow tax base is seen as a '€œfundamental headwind facing Indonesia'€™s public finances'€, according to Philip McNicholas, a Hong Kong-based economist with BNP Paribas.

He said that Jokowi'€™s experience in increasing locally generated recurring revenues by 12.5 percent on inflation-adjusted basis as Surakarta mayor, twice Central Java'€™s average of 6.4 percent, made him the right person for the job.

'€œRaising the tax take will be the greatest challenge facing the next president,'€ McNicholas added.