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View all search resultsAnalysis: Indonesia’s tax revenue: Mirage or miracle
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An officer (right) helps a woman file her annual tax return on March 27, 2026, via the new Coretax platform of the Finance Ministry’s Directorate General of Taxes (DGT) at the Meulaboh Tax Office in West Aceh regency, Aceh. ( Antara/Syifa Yulinnas)
I
ndonesia’s economy has recently received a welcome piece of good news, with the latest state budget figures showing a sharp increase in tax revenue. Net tax revenue rose by a remarkable 24.1 percent year-on-year as of August 2026, reaching Rp 1.409 quadrillion (US$79 billion), or 59.8 percent of the full-year target. Finance Minister Suahasil Nazara attributed the increase to higher global oil and gas prices, strong domestic consumption and improvements in the Coretax system.
However, the upbeat announcement comes against a backdrop of persistent youth unemployment and uneven economic growth. Adding to fiscal pressures are the current administration’s major programs, such as the free nutritious meal program and the development of the Red and White Cooperatives. The contrast therefore raises a question: Is the recent surge in tax revenue really a remarkable achievement amid Indonesia’s current economic conditions, or partly a mirage that masks weaknesses underneath?
The headline figure itself provides the first reason for caution, as the sharp increase partly reflects a low comparison base rather than simply underlying strength in the Indonesian economy. Net tax revenue stood at Rp 1.135 quadrillion in August 2025, compared with Rp 1.197 quadrillion in August 2024, Rp 1.247 quadrillion in August 2023 and Rp 1.172 quadrillion in August 2022, when the economy was still emerging from the COVID-19 pandemic.
The weak 2025 base was partly the result of deductions from tax refunds. Gross tax revenue that year actually recorded 2.1 percent year-on-year growth. This points to tax refunds as an important part of the story. Refund payments fell sharply from Rp 304.29 trillion as of August 2025 to Rp 191.73 trillion as of August 2026. Taxation Director General Bimo Wijayanto attributed the decline to what he described as more prudent, compliance-based management of tax refunds.
The impact on taxpayers, however, may be less positive. While the government’s ambitious spending programs require tighter fiscal management, delays or greater restrictions on tax refunds could put pressure on corporate cash flow and undermine business certainty. Tax refunds are ultimately taxpayers’ money, and managing them more selectively may improve the government’s net revenue position without necessarily indicating a corresponding improvement in underlying economic activity.
Employment quality remains a concern, while growth has been concentrated partly in government-driven and capital-intensive sectors even as revenue from value-added tax (VAT), luxury-goods tax and corporate income tax has increased. Although the national unemployment rate has declined, this does not necessarily indicate an improvement in job quality. The headline rate obscures a broader shift in which workers who cannot find employment in the formal sector increasingly turn to informal work, which tends to offer lower productivity, less security and weaker earning potential.
Higher-income households have provided much of the spending momentum, while lower-income groups remain under pressure. Government spending presents a similar question about the quality and breadth of growth. The 5.29 percent GDP growth figure released on Aug. 5 showed government consumption as the only expenditure component recording double-digit growth, highlighting the increasingly important role of fiscal spending in supporting economic activity.
