Indonesia likely to have $15b tax revenue shortfall

JAKARTA • Indonesia will likely have a shortfall of 150 trillion rupiah (S$15 billion) in tax revenue this year, the tax office said, a development that could mean a ballooning of its budget deficit.

When Jakarta set its tax targets for this year, many analysts said they were unrealistically high. A slowdown in South-east Asia's largest economy has increased the difficulties in meeting 2015 collection targets. At the end of September, the tax office had collected only 53 per cent of its full-year target.

"In early June, my calculation of (tax) shortfall was 120 trillion rupiah. But seeing the deteriorating economic condition and strong dollar, we expect the shortfall to swell to 150 trillion rupiah," Mr Sigit Priadi Pramudito, the finance ministry's director-general of tax, told reporters yesterday. His department oversees collection of all taxes except for excise ones and duties for exports and imports.

Originally, President Joko Widodo's government aimed to keep this year's budget deficit to 1.9 per cent of gross domestic product (GDP). With a revenue shortfall of 120 trillion rupiah, the deficit will expand to 2.23 per cent of GDP.

A rise in the revenue shortfall could naturally widen the budget deficit, though Mr Pramudito did not speculate on how much it will be.

Mr Pramudito said he hopes the government and Parliament will agree soon on a law on tax amnesty - a tax rate discount to encourage untaxed wealth disclosure - saying the move can boost revenue by 60 trillion rupiah this year. A tax amnesty draft Bill is currently under discussion in Indonesia's Parliament.

The tax office has estimated there are around 3,000 trillion rupiah of Indonesian assets in Singapore, he said, without commenting on how much of that total is untaxed.

In a bid to attract investment and maintain people's buying power, Indonesia this year has offered a series of tax breaks that may further disrupt revenue flows. That includes a 15-year tax holiday for some firms, removal of luxury tax for most goods and a higher income threshold at which individuals start to pay tax.

A fifth round of stimulus measures aimed at reviving economic growth will be announced today, President Joko said.

REUTERS

A version of this article appeared in the print edition of The Straits Times on October 22, 2015, with the headline 'Indonesia likely to have $15b tax revenue shortfall'. Print Edition | Subscribe