Sri Mulyani's top priority is building trust in fiscal policy

Dr Sri Mulyani Indrawati.
Dr Sri Mulyani Indrawati.PHOTO: REUTERS

JAKARTA • Finance Minister Sri Mulyani Indrawati is putting trust-building at the top of her agenda as she tries to get more Indonesians to pay their taxes to raise funds for a massive infrastructure plan aimed at stimulating growth in South-east Asia's largest economy.

"My job, first, is to restore confidence in the whole fiscal policy and our budget," Dr Sri Mulyani said in an interview yesterday.

"And that's why clarity about what is the area of the fiscal side, both on the revenue side, spending side, financing side, should be as clear and as credible as possible."

Dr Sri Mulyani, 53, built a reputation as a technocrat and economic reformer when she was previously the finance minister, from 2005 to 2010. Following an opposition campaign accusing her and then Vice- President Boediono of abusing their authority, she left to join the World Bank as one of three managing directors.

Her return to the helm of the Finance Ministry last month was lauded by investors as adding impetus to the economic plans of President Joko Widodo.

She will help steer a tax amnesty programme that the government hopes will boost its coffers by as much as 165 trillion rupiah (S$16.8 billion) this year.

CONFIDENCE ISSUE

It's not acceptable for a country like Indonesia to have a tax ratio which is very low. This is... because both sides, the taxpayers as well as the government, have not been able to establish a good relationship based on trust, confidence and credibility.

DR SRI MULYANI INDRAWATI, on Indonesia's low tax collection rates.

Indonesia has one of the lowest tax collection rates in the region. In 2014, just 900,000 Indonesians submitted returns.

"We're improving ourselves, but if you're not compliant, I'm going to take it very seriously," she said, referring to those who don't pay their taxes. "Serious action, domestically as well as internationally.

"It's about time for Indonesia to have this compliance level from all parties."

Mr Joko aims to boost economic growth to 7 per cent during his term, in part by spending billions of dollars on rail, road and port projects.

A tax-to-GDP ratio at around 11 per cent and sliding commodity prices have put that goal out of reach for now.

"It's not acceptable for a country like Indonesia to have a tax ratio which is very low," Dr Sri Mulyani said. "This is... because both sides, the taxpayers as well as the government, have not been able to establish a good relationship based on trust, confidence and credibility."

Indonesia has struggled to meet its revenue target due to weaker- than-expected global demand for commodities and a slowdown in China, its top export market.

Any shortfall that cannot be explained by these factors must be due to the ministry's inability to collect taxes, Dr Sri Mulyani said.

She pledged to address Indonesia's complicated procedures and high tax rates compared with neighbouring countries.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on August 20, 2016, with the headline 'Sri Mulyani's top priority is building trust in fiscal policy'. Print Edition | Subscribe