Jakarta, May 23, 2025 – The appointment of Bimo Wijayanto as the new Director General of Taxation marks a critical juncture in shaping Indonesia’s fiscal policy. The Indonesia Just Tax Forum (FPBI), a coalition of civil society organizations advocating for tax reform, outlines five urgent tasks to ensure a fair, transparent, and progressive tax system. These agendas address fiscal challenges, economic inequality, and the need to strengthen Indonesia’s role in global tax governance.
Slowing Tax Revenue, Rising Fiscal Pressure
Indonesia’s tax revenue is facing a worrying downward trend. In 2022, tax revenue surged by 34.27%, from IDR 1,278 trillion to IDR 1,716 trillion, driven by post-pandemic economic recovery. However, growth slowed to 8.87% in 2023 and a mere 3.38% in 2024. By the first quarter of 2025, tax revenue reached only IDR 322.6 trillion, or 14.7% of the annual target of IDR 2,189.3 trillion, a drastic 27.73% decline compared to January–April 2024 (from IDR 624.2 trillion to IDR 451.1 trillion). This reflects heavy reliance on external economic factors, such as global commodity prices, and weak efforts to tap domestic tax potential. Indonesia’s tax-to-GDP ratio remains stagnant, far below the international recommendation of 15%. It was 10.24% in 2018, dropped to 8.33% in 2020 due to the pandemic, and only slightly recovered to 10.38% in 2022, 10.31% in 2023, and fell again to 10.08% in 2024. The inability to capture tax potential from large corporations and high-income individuals exacerbates this structural crisis.
Five Urgent Tasks for the New Director General of Taxation
1. Building a Fair and Progressive Tax System
A fair tax system must be the foundation of fiscal policy. The primary focus is expanding the tax base by targeting the wealthiest through wealth taxes and adjusting personal income tax (PPh) rates to be more progressive. Currently, the tax burden is disproportionately borne by low- and middle-income groups, while the wealthy often exploit legal loopholes to avoid taxes.
This reform requires political courage to restructure tax rates to better reflect the ability to pay. A wealth tax, for instance, could target productive assets like luxury properties or large shareholdings, broadening state revenue without burdening the lower classes. This step would also enhance perceptions of fairness in the tax system, crucial for improving overall tax compliance.
2. Enhancing Fiscal Transparency and Accountability
Transparency is key to minimizing tax leakage and boosting public trust. FPBI urges public country-by-country reporting by large corporations. Digital tax monitoring systems should be developed to detect tax avoidance practices, such as profit shifting to low-risk jurisdictions.
Additionally, inter-agency cooperation with bodies like the KPK and PPATK must be strengthened to trace illicit financial flows and enforce stricter compliance. Ineffective tax amnesty schemes that benefit tax avoiders should be discontinued. The Director General must also expedite tax system automation, enhance the capacity of tax officials, and improve their accountability. Greater transparency enables public oversight of tax fund usage, strengthening fiscal accountability.
3. Reducing Inequality and Strengthening Social Protection
Taxes should serve as a redistributive tool to reduce economic inequality. Tax revenue must be optimally allocated to fund social protections, such as universal healthcare, social assistance, and free education. Amid rising living costs and limited access to basic services, the state must ensure that taxes paid by citizens translate into tangible benefits that alleviate poverty and enhance welfare.
Currently, Indonesia’s social protection system is selective rather than universal, targeting only those deemed poor and failing to provide economic security for the vulnerable middle class. A progressive tax system should drive reforms toward universal social protection, ensuring equitable access to basic needs like education and healthcare while reducing clientelism and vote-buying during elections. Transparent and accountable tax revenue redistribution is critical to building public trust, as many feel that taxes paid do not match the public services received. The new Director General must prioritize budget allocations for vulnerable groups, such as informal workers and poor or near-poor families, to strengthen the social contract between the state and its citizens.
4. Returning Taxes to the People
Taxation is a social contract requiring the state to return every rupiah collected as tangible benefits for the public. This includes investments in public infrastructure, quality healthcare, and affordable education. Disparities in access to basic services, especially in remote areas, indicate suboptimal distribution of tax benefits. The new Director General must ensure tax management prioritizes public interests over mere revenue targets. Programs like targeted energy subsidies, improved public health facilities, and educational scholarships can embody the return of taxes. This approach will shift perceptions of taxes from a burden to a shared investment in a better future.
5. Playing an Active Role in Global and Regional Tax Reform
Indonesia must lead in promoting fair global tax governance, especially for developing nations. The dominance of developed countries in frameworks like the OECD/G20 Inclusive Framework often disadvantages developing nations with limited capacity and bargaining power. Initiatives like the UN Tax Convention should be supported to create a more inclusive international tax system.
Regionally, Indonesia can strengthen the ASEAN Tax Forum to address taxation challenges in the digital and cross-border economy. For example, taxing multinational tech companies requires robust regional cooperation. With its strategic position, Indonesia can lead fiscal diplomacy to ensure a fairer distribution of tax benefits among developing nations.
With fresh public legitimacy, Director General Bimo Wijayanto has a significant opportunity to realize progressive tax reforms. Taxes are not merely a fiscal tool but also an instrument of social justice and economic sovereignty. FPBI calls on all societal elements to support these five urgent agendas for a fairer, more transparent, and prosperous Indonesia.
Contacts:
PWYP Indonesia: Meliana Lumbantoruan (meliana@pwypindonesia.org)
The Prakarsa: Ema Kurnia Aminnisa (eaminnisa@theprakarsa.org)
TI Indonesia: Lalu Hendri Bagus (lbagus@ti.or.id)
CELIOS: Media Askar (media.askar@celios.co.id)
IGJ: Komang Audina Permana Putri (audina@igj.or.id)