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Tax target hard to meet: Govt
Finance Minister Bambang Bro-djonegoro said in Jakarta on Thursday that the government would likely be unable to achieve this yearâs tax revenue target due to the countryâs economic slowdown
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F
inance Minister Bambang Bro-djonegoro said in Jakarta on Thursday that the government would likely be unable to achieve this year's tax revenue target due to the country's economic slowdown.
However, the minister said the budget deficit would not surpass a 3 percent threshold despite the shortfall in tax revenues. Based on the government's initial calculations, the budget deficit may swell to 2.2 percent of gross domestic product (GDP) this year.
The 2.2 percent deficit is the highest limit of the 1.9-2.2 percent range listed in the revised 2015 state budget.
Bambang said the 2.2 percent deficit was based on an assumption of a shortfall of Rp 120 trillion (US$9.08 billion) in tax revenue, while rea-lized spending only reached Rp 600 trillion, or 93 percent of the target.
'Based on previous years, realized spending has always been below 100 percent. We see that if there is a shortfall of Rp 120 trillion in tax revenues and spending can only reach 93 percent, the outlook for this year's budget will remain manageable with 2.2 percent as the pessimistic scena-rio,' Bambang said during a meeting with the House of Representatives Commission XI on Wednesday.
The ministry revealed on Wednesday that as of May 22, the realization of total state revenue stood at Rp 508.6 trillion, far lower than Rp 571.5 trillion recorded through May 30 last year.
From the total revenue, tax as well as customs and excise contri-buted Rp 416.8 trillion or 28 percent of this year's budget, slightly lower than Rp 422.2 trillion or 33.9 percent of the 2014 budget.
The data also showed that state spending fell to Rp 552.5 trillion as of May 22 this year, from Rp 605.7 trillion as of May 30 last year.
Based on the realization, Indonesia's budget deficit stood at 0.38 percent of GDP or equal to Rp 43.9 trillion as of May 22, which was actually a decrease compared to 0.55 percent of GDP or equal to Rp 64.3 trillion on May 15.
Indonesia's tax revenue target this year stands at Rp 1.4 quadrillion, which is around 30 percent higher than last year.
The International Monetary Fund previously estimated that Indonesia's budget deficit could swell to 2.4 percent of GDP this year, while the World Bank warns it could hit 2.5 percent, far higher than the 1.9 percent of GDP targeted in the revised 2015 state budget. Indonesia has a law forbidding the budget deficit from exceeding 3 percent of GDP.
In order to mitigate the fiscal risk, Bambang said the government had prepared two main strategies, which included seeking secured and low-risk funds through reducing the issuance of government bonds in rupiah denomination, adding that 'rupiah government bonds have the highest risk in terms of its coupon when a sudden reversal of capital happens'.
Second, Bambang said the go-vernment was ready to tap into various debts, such as from bilateral and multilateral financing agencies, program-based and standby loans, as well as accumulated budget surplus (SAL).
Meanwhile, despite acknowled-ging a possible shortfall in tax revenue this year, Bambang said the ministry would continue its efforts in taxation through several strategies, including the reinvention policy, or a write-off of tax fines to draw in more taxpayers.
Second would be a reduction of tax leakage in value-added tax (VAT) restitution through the implementation of electronic invoices, Bambang added.
'The third one is tax extensification, because out of 45 million people who have jobs, only 26.8 million own a tax file number [NPWP]. Of those who have a NPWP, only 10 million paid taxes,' Bambang said.
