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Tax ratio target raised to 9.5% of GDP this year
The Finance Ministry is banking on the implementation of new tax rules and continued economic recovery.
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Fiscal Policy Agency (BKF) head Febrio Nathan Kacaribu speaks during a presentation in this undated photo. (courtesy of /Indonesia University)
T
he Finance Ministry has raised its annual tax revenue target in 2022, banking on the implementation of new tax regulations and continued economic recovery.
The ministry's Fiscal Policy Agency head Febrio Nathan Kacaribu said the government was aiming for a tax-to-GDP ratio of between 9.3 and 9.5 percent this year, higher than the 9.11 percent achieved last year.
Febrio said the higher target took into account the Harmonized Tax Law taking effect this year. The law raises income tax for the rich, increases value-added tax (VAT), introduces carbon taxes and a second tax amnesty program.
“We hope it could be above 10 percent of GDP in 2024, through reforms on the policy and administrative side,” Febrio told reporters during a virtual discussion on Thursday.
Indonesia's tax-to-GDP ratio fell to 8.33 percent in 2020, the lowest level in the past decade, as state income fell amid the pandemic-induced economic downturn.
A strong economic recovery in 2021 helped the government regain its bearings ahead of the upcoming fiscal consolidation. The GDP grew 3.69 percent last year, an improvement following a contraction of 2.1 percent the previous year.
Existing regulations stipulate that the government must reinstate a budget deficit cap of 3 percent of GDP by 2023. This could be achieved by either increasing revenue or massively cutting spending, which is also necessary for an economic recovery.
