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Jakarta Post

Indonesia’s low tax-to-GDP ratio

Jakarta   /   Thu, October 11 2018   /  02:00 am

The World Bank, the International Monetary Fund (IMF) and the Organization for Economic Co-operation and Development (OECD) — all of which have released their latest surveys on the Indonesian economy at the ongoing 2018 IMF-World Bank Group Annual Meetings in Nusa Dua, Bali — share their views on Indonesia’s utterly low tax-to-GDP ratio.

The OECD points out in its latest survey that low tax revenues cause low public spending, which undermines the quality of services and exacerbates infrastructure gaps. Indonesia’s tax base is narrow and tax compliance is poor whereas increasing tax revenues is critical to financing investment and social programs.

The IMF concurs, saying that since Indonesia’s tax-to-GDP ratio is less than 11 percent — way below the 15 percent threshold needed to stimulate growth — the country cannot fully harness the potential of its 5.4 perce...