Government Revenue Collection Indonesia at 23% of 2016 Target in Early May
So far this year, realization of government revenue in Indonesia (up to 8 May 2016) has reached IDR 419.2 trillion (approx. USD $32 billion), roughly 23 percent of the full-year revenue target in 2016 (IDR 1,822.5 trillion). This result is weaker compared to last year when the government collected IDR 476.3 trillion in the period 1 January - 15 May 2015, or 27 percent of the full-year target. Meanwhile, government spending reached IDR 586.8 trillion between 1 January and 8 May 2016, or 28 percent of the full-year target (IDR 2,095.7 trillion), roughly the same as government spending during the same period last year.
Indonesian Finance Minister Bambang Brodjonegoro stated - based on the latest data - that the nation is plagued by a shortfall of around IDR 167.6 trillion (approx. USD $12.7 billion), or 1.3 percent of gross domestic product (GDP) in the period up to 8 May 2016. Last year, around the same time (1 January - 15 May 2015) the shortfall stood at 0.55 percent of GDP, implying a rising deficit. However, Brodjonegoro said a budget deficit below 3 percent of GDP is manageable and therefore the government is not yet to revise its revenue or spending targets this year.
However, Finance Minister Brodjonegoro did state that the government may need to revise this year's state revenue target in case the House of Representatives (DPR) rejects the Tax Amnesty Bill that is currently being discussed. Earlier, Bank Indonesia estimated that this bill, which makes it attractive for tax evaders to come clean and repatriate their wealth into Indonesia, can bring home about IDR 560 trillion in offshore assets and IDR 46 trillion in additional tax revenue. The release of the Panama Papers, the massive leak that involves 11.5 million confidential documents from the database of Panama-based law firm Mossack Fonseca (and signals widespread tax evasion), can help to collect more tax revenue.
Read more: Indonesia's Tax Amnesty Bill Needs more Deliberation
Based on data from Indonesia's tax office, tax revenue realization in Q1-2016 reached 13.6 percent of the full-year target, down from the situation last year when the government collected 16.1 percent of the 2015 target in the first quarter. Weak tax collection in Q1-2016 also implies the government really needs to step up tax revenue in the remainder of the year in order to achieve its target. In full-year 2016 Indonesia targets to collect tax revenue of IDR 1,360.1 trillion. This target is considered highly unrealistic by analysts, particularly given Indonesia's tax collection in 2015 only reached IDR 1,055.6 trillion. It remains unclear what could support a 28 percent (y/y) jump from last year's tax revenue realization as economic growth is expected to accelerate slightly to 5.1 percent (y/y) from 4.8 percent (y/y) and would not be enough to cause a 28 percent surge in tax collection, while the nation's exports remain sluggish due to persistently low commodity prices, and revenue from the Tax Amnesty Bill may only reach IDR 46 trillion - if passed by Indonesian legislators.
In early April 2016, it was reported that the central government was drafting a revision to the 2016 State Budget, cutting state revenue from IDR 1,822.5 trillion to IDR 1,755.5 trillion, causing the budget deficit to rise from 2.15 percent to 2.5 percent of GDP. However, there have not been any further news stories about this draft.
Indonesia's Tax Collection Target and Realization 2008-2016
(in IDR trillion)
(in IDR trillion)
(in IDR trillion)
green color indicates that tax revenue realization met the target set in the State Budget; red color indicates that tax revenue realization failed to meet the target
¹ indicates forecast
Sources: Direktorat Jenderal Pajak & Nota Keuangan