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World Bank ready to help Indonesia boost tax ratio, Gerindra vice chair claims

Source
Tempo - October 8, 2024

Han Revanda Putra, Petir Garda B, Jakarta – The Vice Chair of the Gerindra Party Advisory Council, Hashim Djojohadikusuma, claims the World Bank is ready to help Indonesia boost its tax ratio. Last year, Indonesia's tax ratio only reached 10.31 percent of its Gross Domestic Product (GDP)

The Arsari Group CEO said this year's tax ratio is expected to grow up to 12.7 percent, lower than other countries' revenue ratio. For example, Cambodia logs 18 percent while Vietnam 23 percent.

"Why so? It's because Indonesia lacks enforcement compared to Cambodia and Vietnam," he said during an economic discussion at the Indonesian Chamber of Commerce and Industry (Kadin) Tower on Monday, October 7, 2024.

Thus, Hashim admits that he's met with and received the data on other countries' tax ratios from the World Bank. Prabowo Subianto's brother said improving the tax ratio is only a matter of time and political will.

The methods to achieve a high tax ratio are readily available, Hashim said. One example is the utilization of artificial intelligence or AI. With these tools, Indonesia can achieve a tax ratio of 18 to 23 percent. "We will show you how to do it. The World Bank is ready to help us," he said.

The Director of the Institute for Demographic and Poverty Studies (Ideas), Yusuf Wibisono, said that to realize his campaign promises, President-elect Prabowo Subianto needs to increase the tax ratio to around 12 percent of GDP.

During the 2024 presidential election campaign period, Prabowo vowed to run several high-cost programs, including free nutritious meals, increasing the salaries of government employees, and increasing agricultural productivity.

"President Prabowo will face an increasingly difficult situation because of the political promises he must fulfill," Yusuf said when contacted by Tempo, on Tuesday, June 25, 2024.

Yusuf said Prabowo's political promises can only be realized if the 2025 State Budget (APBN) has significant additional fiscal space. "At least a tax ratio of around 12 percent of GDP is needed," he said. However, Yusuf considered this scenario difficult to achieve, as the government and the parliament only dared to set a 10-10.2 percent tax-to-GDP ratio in 2025.

Without a significant boost in the tax ratio, Yusuf believed continuing President Joko Widodo's legacy projects while fulfilling Prabowo's own political promises would have two implications. First, an upsurge in government debt and a budget deficit. Second, cuts to discretionary spending such as infrastructure or social assistance spending.

Source: https://en.tempo.co/read/1925735/world-bank-ready-to-help-indonesia-boost-tax-ratio-gerindra-vice-chair-claim

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