By: Prabowo Subianto [excerpted from “National Transformation Strategy: Towards Golden Indonesia Emas 2045,” pages 172-173, 4th softcover edition]
Our national income is derived from both tax and non-tax sources (PNBP). These revenues are utilized to finance various government programs, including the other seven “Quick Impact Programs” that I have proposed.
At present, our tax and non-tax revenues are operating below their optimal levels. In 2021, Indonesia’s tax revenue-to-GDP ratio was a mere 9.1%, with the total revenue-to-GDP ratio standing at 11.8%.
These figures fall short when compared to neighboring countries. For example, in the same year, Cambodia achieved a tax ratio of 16.4% and a revenue ratio of 18.1%. Malaysia recorded a tax ratio of 11.2% and a revenue ratio of 15.1%. Thailand outperformed us with a tax ratio of 14.3% and a revenue ratio of 18.5%.
By 2024, Indonesia’s GDP is projected to reach Rp. 22,786 trillion. With a revenue ratio of only 11.8%, our national income would amount to Rp. 2,700 trillion. However, a 1% increase in the revenue ratio would contribute Rp. 228 trillion. If we were to match Cambodia’s revenue ratio of 18.1%, our income in 2024 would be Rp. 4,142 trillion. In essence, aligning with Cambodia’s performance would elevate our national revenue from Rp. 2,700 trillion to Rp. 4,142 trillion – an increase of Rp. 1,442 trillion.
An additional Rp. 1,400 trillion in revenue could effectively finance all the Quick Impact Programs, including the establishment of premier schools and world-class hospitals in every regency, as well as providing free meals for all school children.
It is worth noting that my proposal does not entail a hike in tax rates. Rather, the focus should be on ensuring that the state’s rightful revenue is collected efficiently.
A 2019 study by the Corruption Eradication Commission (KPK) revealed that revenue leakage exceeded budget leakage, highlighting the gap between the state’s anticipated revenue and the actual collection.
Notably, in 2023, the Financial Transaction Reports and Analysis Center (PPATK) disclosed suspicious transactions amounting to hundreds of trillions involving officials at the Directorate General of Taxes. Preventing such occurrences is imperative.
Therefore, Indonesia needs innovative strategies to enhance domestic revenue collection. It is crucial to segregate the management of state funds from revenue handling and establish a National Revenue Agency, mirroring practices in various other nations. The aim should be to elevate the national revenue-to-Gross Domestic Product (GDP) ratio to 23% in alignment with its potential.
