Considering big chances of seeing another tax shortfall in 2017, Indonesian authorities could decide to cut spending next year in an effort to enhance fiscal stability and relieve pressure on the budget deficit. Although this would be a good decision from the perspective of fiscal stability, it would also mean that Indonesia's economic growth cannot reach its full potential. For example, it could mean that the government decides to cut its infrastructure development budget.

In 2016 the Indonesian government slashed public spending by IDR 137.6 trillion (approx. USD $10.2 billion), consisting of IDR 72.9 trillion that was taken from the "transfer to the regions" budget and the remainder from budgets that were allocated to the ministries and other government agencies (particularly from the budgets of the Defense Ministry, Public Works and Housing Ministry, and Agriculture Ministry).

Lana Soelistianingsih, Economist at Samuel Asset Management, said Indonesia needs to raise efforts to reform its tax system structurally. One key strategy would be to lower tax tariffs to make it more attractive for people and businesses to pay taxes.

Earlier, Indonesian Finance Minister Sri Mulyani Indrawati said the number of registered Indonesian taxpayers rose to 32 million (out of a total population numbering 255 million), while there are only 32,000 tax officials (almost the same figure as a decade ago). This low ratio (tax official per registered taxpayers) is one of the reasons why Indonesia's tax system is highly inefficient.

Per 31 October 2016, Indonesia's tax revenue stood at IDR 986.6 trillion, or 64.1 percent of the target set in the Revised 2016 State Budget (IDR 1,539.2 trillion). With only two more months to go, it is highly unlikely that the target can be achieved. The positive news, however, is that tax revenue realization in the first ten months of 2016 better compared to the IDR 893.9 trillion that was collected in the same period one year earlier.

Indonesia's Tax Collection Target and Realization 2008-2015:

   2008  2009  2010  2011  2012  2013  2014  2015
(in IDR trillion)
 534.5  597.5  661.4  878.7  885.0  995.2 1,072.4 1,294.3
(in IDR trillion)
 607.4  563.2  650.0  872.6  835.3  916.3  985.1 1,055.6
(in IDR trillion)
  72.9   34.3   11.4    6.1   49.7   78.9   87.2  238.6