Dealing with fiscal risk amid weak tax revenue growth

Winarno Zain
Commissioner in a publicly listed oil and gas service company

PREMIUM

Jakarta / Mon, January 13, 2020 / 10:21 am

Dealing with fiscal risk amid weak tax revenue growth

Women’s world: Workers produce cigarettes at a factory in Malang, East Java. The government has increased the tobacco excise as part of its efforts to boost state revenue. (JP/Aman Rochman)

One of the most pressing issues for the government is weak tax revenue growth. Tax revenue growth was quite small in 2019, lower than previous years, with a significant shortfall from the 2019 target. The budget deficit is forecast to exceed 2 percent of gross domestic product (GDP) in 2019. Given this backdrop and continuing uncertainty in the economy, the 2020 budget will face increased fiscal risk that could have an adverse impact on the economy. Fiscal risk could recur, raising the risk of fiscal pressure on the government budget. The pressure could come from government revenue, expenditure or government contingent liability. It is important to assess to what extent the government budget is exposed to fiscal risk and to assess whether the budget is sustainable in the face of those risks. The fiscal risk for the government budget could derive from several sources but the bigg...