The government has introduced a policy to tighten audit and tax refund (restitution) processes amid the state’s current fiscal pressures. This move is also believed to have been prompted by reports that tax refund disbursements in 2025 reached Rp360 trillion. Meanwhile, the Directorate General of Taxes (DGT) recorded tax revenue realization as of April 29, 2026, at Rp394.8 trillion, equivalent to 16.7 percent of the total annual tax revenue target of Rp2,357.7 trillion, which is set to support various national strategic programs.
An academic from the Faculty of Economics and Business at Universitas Gadjah Mada (FEB UGM), Rijadh Djatu Winardi, assessed that the policy to tighten tax refunds stems from the government’s concern over compliance in the refund process. According to Rijadh, tax refunds are a sensitive issue in the tax system because they involve the state returning funds to taxpayers.
“The risk of erroneous claims or even misuse is relatively higher compared to the tax collection process,” he said on Monday (May 4).
The strengthening of audits, including the involvement of institutions such as the Financial and Development Supervisory Agency (BPKP), is considered a reasonable step to ensure that refunds are granted only for valid claims. However, Rijadh cautioned that this policy should not slow down the entire refund process.
He emphasized the importance of a risk-based approach, where compliant taxpayers continue to receive prompt service, while high-risk cases are subject to deeper examination.
He also highlighted that an increase in refund figures does not necessarily indicate fraud. In the context of Corporate Income Tax, for example, refunds may increase when company performance declines. Meanwhile, for Value Added Tax, higher refunds can occur due to increased export or investment activities.
“This policy needs to be balanced with a risk-based approach and proper analysis so that it does not hinder compliant taxpayers. So, if the question is whether this is purely about oversight or also related to the state’s cash flow, I believe the answer is both,” he said on Monday (May 4).
Amid fiscal pressure, Rijadh explained that efforts to delay refunds may provide short-term cash space, but their effectiveness is very limited if used as a fiscal stabilization instrument. He noted that in times of fiscal strain, when spending needs increase and revenue space is constrained, the government tends to be more sensitive to cash outflows, including refunds.
“In this context, slowing down refunds can make the state’s cash position appear more flexible in the short term,” he said.
Nevertheless, this approach cannot serve as a sustainable strategy. Conceptually, refunds are not a fiscal policy instrument but rather a state obligation for overpaid taxes. When refunds are delayed, what occurs is not an increase in revenue but a postponement of obligations.
“Fiscal policy usually relates to changes in tax rates or bases to influence the economy. Refunds are merely an administrative process to return funds that belong to others but are held in the state treasury,” he explained.
Rijadh pointed out that the business sector, particularly exporters or companies in the investment phase, may face liquidity pressures as a result. Companies may need to seek alternative funding sources such as bank loans, additional shareholder capital, or postponing expansion.
“In the long term, this condition can affect investment, production, and even tax compliance,” he said.
He further explained that in modern tax administration practices, referring to recommendations from the Organisation for Economic Co-operation and Development (OECD), a fast and predictable refund system is a key indicator of economic health.
Therefore, if refunds are excessively delayed, the short-term cash benefits to the government may be offset by higher economic costs on the business side.
As a solution, Rijadh proposed several improvements. First, the implementation of a risk-based system must be carried out consistently so that compliant taxpayers are not disadvantaged. Second, process transparency must be strengthened so taxpayers can clearly monitor the status of their applications. Third, digitalization and data integration must continue to be promoted to accelerate processes while strengthening oversight.
In addition, he highlighted the importance of optimizing the mechanism for reducing Article 25 Income Tax installments. According to him, many refund cases arise because requests to reduce installments are not approved, leading companies to pay higher taxes upfront and ultimately overpay. With a more flexible system, the need for refunds can be minimized from the outset. In his view, companies should not have to effectively lend funds to the state.
“This option can help maintain business cash flow without relying on refunds, while also not significantly disrupting state revenue,” he explained.
In conclusion, Rijadh emphasized that the tightening of refund policies should be viewed proportionally. On one hand, it is a reasonable response to fiscal pressures and potential risks of leakage in the refund system. On the other hand, all parties must uphold the principle that refunds are a taxpayer’s right.
“The government needs to strike a balance for all,” he concluded.
Author: Hanifah
Editor: Gusti Grehenson
Post-editor: Zabrina Kumara
Photo: Freepik