Prisma Ardianto, Heru Andriyanto, Jakarta – Indonesia is stepping up efforts to widen its tax base and tap into the shadow economy as it seeks to raise Rp 2,357.7 trillion ($145.6 billion) in tax revenues by 2026. The target marks a 13.5 percent increase – or Rp 280.8 trillion – from projected 2025 collections of Rp 2,076.9 trillion.
The shadow economy – also known as the underground or informal economy – refers to unreported or underreported business activities that operate outside official oversight. These include cash-based transactions, unregistered businesses, and illicit trade. While difficult to measure, the shadow economy often accounts for a substantial portion of GDP in developing countries, depriving governments of billions in tax revenue while leaving workers and firms outside regulatory protection.
According to the government's 2026 budget plan and financial report, authorities will focus surveillance on high-risk sectors such as retail trade, food and beverages, gold trading, and fisheries. Active "canvassing" investigations will be carried out to identify and register previously untaxed entities.
The government has also appointed foreign entities as value-added tax (VAT) collectors for cross-border e-commerce transactions, strengthening supervision of the fast-growing digital economy. In addition, tax authorities are compiling fiscal data on unregistered businesses operating on digital platforms to improve oversight and compliance.
Warnings over ambitious targets
Earlier this week, the Centre for Strategic and International Studies (CSIS) cautioned that the government's ambitious targets could push it toward tougher tax collection measures and rapid expansion of the taxpayer base.
"The figures suggest the government will intensify its tax collection drive next year. In the past five years, taxes have risen from 77 percent to 86 percent of state revenue," said Deni Friawan, senior researcher at CSIS.
Indonesia's tax base remains shallow. Out of 145 million working-age people, only around 17 million consistently file or pay taxes. Untapped potential in the informal sector and underground economy has left a wide gap in collections, while reliance on global commodity cycles continues to expose state finances to external shocks.
Finance Minister Sri Mulyani Indrawati dismissed concerns that the government may resort to heavy-handed collection tactics. Instead, she prioritized ongoing reforms, tighter compliance oversight, and digital tools as the backbone of revenue growth.
Key measures include strengthening the "core tax" administration system, expanding data sharing across government agencies, taxing digital transactions, and launching joint audit and enforcement initiatives.
"Data integration and the new core tax system will be pushed harder. We still have room to raise revenue without inventing new taxes," Sri Mulyani said.