Indonesia’s Ministry of Finance recorded tax revenue realization of Rp1,917.6 trillion throughout 2025, or 87.6 percent of the 2025 State Budget (APBN) target of Rp2,189.3 trillion. With this achievement, the government faced a tax revenue shortfall of Rp271.7 trillion.
Responding to the decline in tax revenue in 2025, UGM economist Dr. Rijadh Djatu Winardi assessed that the failure to meet the tax target was not merely an administrative issue but also reflected a weakening tax base.
“I think this should be read as a reflection of layered pressures faced by our economy and a fiscal system experiencing a slowdown along with various shocks throughout the year,” he said on Tuesday (Jan. 13).
From an economic perspective, slower growth has indeed had a direct impact on tax revenue. Dr. Winardi emphasized that this was driven by slowing business activity, declining corporate profits, and restrained household consumption.
Even non-economic events, such as disasters, have added pressure to economic conditions. These challenges are compounded by issues in tax administration. The implementation of the Core Tax Administration System, which has yet to operate optimally, has made tax services, reporting, and supervision less efficient than expected.
“As a result, tax extensification and intensification efforts throughout 2025 have not yielded optimal results, posing a risk of declining voluntary compliance if not immediately addressed,” he explained.
Dr. Winardi further stated that the government needs to strike a balance between law enforcement and tax education and literacy.
Given that Indonesia’s tax system is based on self-assessment, “Long-term compliance can only be built if taxpayers understand their obligations, feel well served, and obtain administrative certainty,” he explained.
In addition, the government needs to seriously begin adopting taxpayer policy approaches that take individual behavior into account, rather than relying solely on norms and written regulations.
“This approach is relatively low-cost, does not disrupt business activities, and has the potential to gradually reduce the tax gap,” he added.
Furthermore, Dr. Winardi argued that addressing this issue requires optimizing value-chain-based taxation rather than focusing solely on entities.
Many potential tax revenues are lost not because of low tax rates, but due to transaction fragmentation within a single business ecosystem. This approach is expected to encourage more consistent and reasonable reporting.
“By utilizing cross-sector and cross-institutional data, the government can map value chains more comprehensively, allowing inconsistencies between inputs, outputs, and business margins to be detected at an earlier stage,” he elaborated.
Dr. Winardi also added that strengthening the role of local governments is necessary to expand the national tax base. To date, central and regional taxes have often operated in parallel, or even separately.
In fact, many informal economic activities are closer to local governments, which could potentially become strategic partners in the process of economic formalization.
“In the medium term, this will expand the tax base without increasing the tax rate burden,” he concluded.
Author: Salwa
Editor: Gusti Grehenson
Post-editor: Rajendra Arya
Illustration: Freepik