Indonesia’s incoming president and vice-president Prabowo Subianto and Gibran Rakabuming Raka have set an ambitious tax plan to increase the ratio of tax revenue to Gross Domestic Product (GDP) to 16 percent from its current level of just over 10 percent. To realise this political promise, radical reforms to Indonesia’s tax system are necessary. Prabowo and Gibran proposed the establishment of the State Revenue Agency (BPN), an initiative that centralises all matters of state revenue within a single entity that would report directly to the president. With the BPN operating under the president’s direct supervision, Prabowo and Gibran pledge a transformative overhaul in the management of state revenue. But detailed plans on how this agency will strengthen efforts to achieve the bold target are yet to be fully revealed. This target is a bold aspiration, especially when considering that over the past decade, the peak tax revenue ratio to GDP in Indonesia barely touched 11.4 per cent. Last year’s 2023 tax ratio was 10.21 per cent of GDP, with total tax revenue at IDR 1,869 trillion (EUR 109 billion). As an agency believed capable of significantly elevating the tax ratio, the BPN nonetheless faces a formidable task. The inefficiency in Indonesia’s tax collection is not just due to institutional inefficiencies but also stems from the complex economic dynamics poorly captured by the Finance Ministry’s Directorate General of Taxation. This is especially apparent in its failure to tax the shadow economy, which represents about 26 percent of the nation’s total economy, or roughly IDR 5,223 trillion, i.e. more than EUR 304.5 billion, in 2023. Establishing the BPN is not on its own a definitive solution for improving fiscal performance. Any proposal to establish the BPN should be thoroughly evaluated to ensure it effectively boosts state revenue without unnecessarily straining the state budget through organisational restructuring costs. As a new entity, there are doubts about the BPN’s capability to effectively increase state revenue in its initial stages. This scepticism is not unfounded, given that the BPN results from the integration of the Directorate General of Taxation (DGT) and the Directorate General of Customs and Excise, which is also within the Finance Ministry. This integration process is not without significant administrative challenges, raising questions about how quickly the BPN can transition and focus its efforts on optimising state revenue. The Prabowo–Gibran vision for tax reform through the BPN aims for significant fiscal improvement, demanding meticulous strategy, strong political will and a leadership selection process that prioritises transparency and merit to realise its benefits without straining the state budget. But without genuine dedication and consistent efforts, this initiative risks becoming only a political gesture, merely redistributing power rather than enhancing state revenue.Link di fonte: https://eastasiaforum.org/2024/04/03/how-indonesias-new-president-aims-to-boost-nationwide-tax-revenue/ (ICE GIACARTA)

Fonte notizia: East Asia Forum, 3 April 2024