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Tax collection among Indonesia’s latest fiscal challenges: IMF
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International Monetary Fund (IMF) managing director Christine Lagarde smiles during a press briefing on the sidelines of the 2017 IMF-World Bank Annual Meetings in Washington DC, United States, in this file photo. (IMF/International Monetary Fund)
I
t is not the time for the government to be complacent as it must continue fiscal reform to win public trust in a bid to increase tax collection, the International Monetary Fund (IMF) says.
In its latest assessment, the IMF suggests the country push further fiscal reform, particularly in tax collection, as its tax ratio — the ratio of tax revenue to gross domestic product (GDP) — sits at around 10 percent, much lower than other countries in ASEAN and the Asia-Pacific region.
In comparison, Singapore, Malaysia and Thailand recorded tax ratios of 14 percent, 15 percent and 17 percent, respectively.
“And there’s a need to strengthen that [fiscal reform] in order to create a scope for the government’s ambitious agenda, for addressing the infrastructure gap and raising social spending,” said Kenneth Kang, IMF’s Asia and Pacific department deputy director, on the sidelines of the 2017 IMF-World Bank Annual Meetings in Washington DC.
In terms of structural reform, the IMF called for Indonesia to improve its business environment through the further liberalization of its foreign direct investment (FDI) regime — which includes the Negative Investment List (DNI) — and streamlining complex regulations.
A few months ago, the World Bank called on the government to further relax the DNI.
The bank acknowledged in its June Indonesia Economic Quarterly report that relaxing the DNI would be a difficult decision for the government.
