The new Indonesian Finance Minister has stated that he is planning to increase the effectiveness of tax collection by increasing the number of people involved in tax collection. Indonesia needs to raise more tax revenues, at a time when the decreasing economic growth may lead to a decreased tax take. Indonesia’s ratio of tax to GDP is currently around 12%, but frequently even this target is not achieved owing to the inefficiency of tax collection. The Finance Minister has a stated aim of increasing the tax to GDP ratio to 16% within his first term in office. The increased resources devoted to tax collection will therefore lead to greater efforts to collect the correct amount of tax from both companies and individuals.
The Finance Minister plans to reduce fuel subsidies and increase investment and social spending. Government investment will aim to strengthen Indonesia’s sea transport links and ports. Spending on infrastructure will aim to create a basis for further economic growth. Another aim of government spending will be to reduce the gap in incomes within Indonesia society. All this however needs to be done against the background of a declining economic growth rate. This means that an effort to increase the tax revenue collected is essential and taxpayers should take note that their tax affairs will be subject to increasing scrutiny.
