The International Monetary Fund (IMF) sees room for Indonesia’s tax ratio to rise up to 15% of gross domestic product (GDP). Luis Breuer, IMF Mission Chief for Indonesia, expects to see an improvement in Indonesia’s tax ratio – from the weak level of 10% of GDP in 2017 – on the back of Indonesia’s improving economic growth. Accelerating economic growth should boost tax revenue realization.

An improving tax-to-GDP ratio would have big advantages as it opens a pool of funds that can be used by the government for investment in infrastructure development, education, and healthcare. A rising amount of tax revenue would also mean that the Indonesian government can reduce its dependence on foreign debt.

Indonesia’s weak tax ratio is caused by Indonesians’ weak tax compliance as well as weak monitoring conducted by authorities (there is a lack of tax officials and inspectors).