The tax office collected Rp 1.33 quadrillion (US$97.5 billion) in tax revenue last year, 84.4 percent of the full-year target, causing a shortfall of Rp 245.5 trillion, the worst in at least the last five years.

Sluggish global growth caused contractions in manufacturing industry and the mining sector that reduced their tax contribution by 1.8 percent and 19 percent year-on-year (yoy), respectively, Finance Ministry data showed.

“We expect that there will not be any significant changes in tax collection as [global] uncertainty still looms in 2020,” Center for Indonesia Taxation Analysis (CITA) executive director Yustinus Prastowo wrote in a statement on Tuesday.

“To reach the 2020 tax revenue target, the collection amount must be pushed higher by up to 23.3 percent from 2019’s figure. This will be hard to realize,” he added.

The government expects to collect Rp 1.68 quadrillion in tax revenue this year to fund its infrastructure as well as human-resource development projects, among other things.

At the same time, Indonesia’s economy is expected to grow by 5.1 percent this year, according to an International Monetary Fund projection in October, far lower than the government’s target of 5.3 percent stipulated in the 2020 state budget.

Yustinus said the government eventually should opt to revise this year’s state budget target in a bid to maintain fiscal stability and to prevent an increase in the deficit while the tax office strengthens its strategy to enhance tax collection.

Indonesia’s state budget deficit widened to 2.2 percent last year from the targeted 1.8 percent of GDP.

“Other than the ongoing tax reform, the omnibus bill on taxation will be the breakthrough [to boost tax collection]. However, we need to make sure the omnibus bill is in line with tax reform in a bid to balance state revenue as well as maintaining a [friendly] business climate,” he said.

The government is preparing an omnibus bill on taxation before submitting it to the House of Representatives, hopefully, this month. If passed into law, it will amend several laws, including the General Taxation Law, the Income Tax Law and the Value Added Tax Law.

Finance Ministry Taxation Director General Suryo Utomo said on Tuesday that his institution would carry out “tax collection optimization” efforts that included improving taxpayers’ voluntary compliance. To achieve such compliance, the tax office will further automate its services to ease tax registration and payment processes, among other things.

“Then, we will implement just tax supervision in accordance with the prevailing law,” he said. “This is about how we collect taxes without disrupting business dynamics.”

Indonesia’s economy grew by 5.02 percent in the third quarter last year, the slowest pace in more than two years. The growth of manufacturing industry cooled to 4.15 percent yoy compared with 4.35 percent in the same period in 2018. Mining expansion also fell to 1.95 percent in the third quarter last year versus 2.67 percent growth in the corresponding period of 2018.

Manufacturing industry contributed Rp 365.49 trillion in tax revenue last year while the mining sector chipped in Rp 66.12 trillion.

Overall, the government collected Rp 1.96 quadrillion in state revenue last year, below its target of Rp 2.16 quadrillion, making a revenue shortfall of around Rp 207.9 trillion or 2.2 percent of GDP.

However, some analysts choose to see the glass half full.

"We think the slowdown in tax revenue has hit bottom and is poised for a U-turn in 2020, supported by a global economic recovery and potential pick-up in domestic investment," Bahana Sekuritas economist Satria Sambijantoro wrote in a research note.

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