What is more important, she says, is that the budget is spent on things that will be enjoyed by people in the bottom 40 percent wealth bracket and whether the nation can create a taxation regime that produces a productive and competitive economy while at the same time addressing inequality.

“We can have high growth but many are left jobless and inequality occurs,” the former World Bank managing director told The Jakarta Post in an interview on Tuesday, when asked about her top priority in leading the institution responsible for billions dollars of state revenue and assets.

When Sri Mulyani, a former finance minister from the 2005 to 2010 period, assumed offi ce in late July, she was met with a cash-strapped state budget due to a tax target overshoot. In her first week, she cut spending by Rp 137 trillion (US$10.55 billion) and widened the tax revenue shortfall to Rp 219 trillion until year-end.

Sri Mulyani said the budget would cover infrastructure, poverty alleviation programs and civil servants’ salaries. “But it’s not going to be enough for wasting money,” said one of the world’s most powerful women, according to Forbes magazine.

So while money is limited, Indonesia is not in a budget crisis, Sri Mulyani said. Spending can only be disbursed for priority programs, those that will alleviate poverty, create jobs and generate growth. For that reason, a more realistic tax collection target is within sight under her leadership.

For next year, the government expects tax revenue to reach Rp 1.49 quadrillion, slightly lower than this year’s Rp 1.53 quadrillion target in the revised 2016 state budget. Gadjah Mada University economist Tony Prasetiantono expressed hope that the finance minister could be more realistic and would bring the President away from “wishful thinking”.

“The government’s big appetite for spending on development must be brought in line with its ability to collect revenue,” he said.

To reach its tax target, the government is working with the House of Representatives to revise some taxation laws, including the General Taxation Law (KUP) that may give birth to the nation’s first ever tax agency, income tax (PPh) and value added tax (PPN).

“We will revise some laws to make sure we are updated,” Sri Mulyani said, stressing the need to capture the new economy that involves a lot of untaxed digital transactions. Also, there are too many exemptions in

the PPN, she added.

In formulating new tax rates and policies, one thing she has said she would avoid was a race to the bottom, referring to government discourse to lower corporate income tax from 25 percent at present to compete with neighboring country Singapore’s 17 percent. The Finance Ministry will hand over all calculations on the matter to the President who is committed to creating a competitive business environment, which may mean lower corporate tax.

“We will deliver options to the President so he can politically make an informed decision,” said the former director of the University of Indonesia’s Institute for Economic and Social Research (LPEM-UI), a renowned university-based economic research house.

Sri Mulyani is a firm believer that law is just law, policy is just policy, but they mean nothing without the institutional capacity to be implemented and executed. Hence, it is expected that she will also prioritize institutional reform and capacity building of all those who work under her ministry, which covers debt, fiscal and national asset management, among other things.

Bank Central Asia (BCA) chief economist David Sumual agreed, saying problems may come from home.

“The obstacle in implementing the minister’s objectives include the bureaucracy,” he said, calling for an effi cient, effective and productive bureaucracy to optimize state budget execution so as to create the desired effects on the overall economy. The fact that the government always fails to spend 100 percent of its budget indicates that its institutions often propose higher-than-needed spending requirements, said Samuel Asset Management economist Lana Soelistianingsih.

“It is true that the government’s task is to boost the economy but if the spending is not realized, it is just a waste,” she said on Tuesday.

Editor's note: Paragraph three in this story has been corrected.

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