Indonesia's January Tax Revenue Realization Shows Promising Signs
Indonesia's Directorate General of Taxes claims that tax revenue realization in Indonesia will grow by a double-digit figure (on a year-on-year basis) in January 2018. This result comes on the back of strengthening commodity prices that bring in more tax money for the government.
Yon Arsal, Tax Revenue and Compliance Director at the Directorate General of Taxation, said tax revenue realization has been good so far in January. However, he could not mentioned exact figures because the month has not ended yet. He added that at the end of the month he still expects quite large movements in value added tax (VAT) receipts. But he did say that - up to 18 January - Indonesia's tax revenue growth was more than 10 percent (y/y).
This makes it a different scenario from last year when the nation's tax revenue realization only grew by 1.5 percent (y/y) to IDR 69.9 trillion (approx. USD $5.2 billion). Assuming a 10 percent growth rate, tax revenue realization could reach IDR around 77 trillion in the first month of 2018, hence maintaining the momentum. Despite the weak first month, last year's non-amnesty tax income rose by 16 percent (y/y) in full-year 2017, a strong performance for Southeast Asia's largest economy where tax compliance and monitoring are notoriously weak.
In the 2018 State Budget the Indonesian government targets for IDR 1,424 trillion (approx. USD $106.3 billion) in tax revenue, up 23.71 percent from tax revenue realization in the preceding year (IDR 1,151.1 trillion). Most likely, just like we saw in recent years, this tax target is set too high. However, the government hopes to see some extra effort from tax offices across the country by setting a high target.
Indonesian Tax Chief Robert Pakpahan is optimistic that Indonesia's tax revenue will grow strongly this year on the back of rising commodity prices, especially crude oil. This boosts tax income from the country's oil & gas sector. While in the state budget the government assumed the crude oil price at USD $48 per barrel, the actual price has increased above USD $60 a barrel.
Crude oil prices have been strengthening gradually over the past two years and therefore Indonesia managed to collect IDR 49.6 trillion in tax income from the oil & gas sector in full-year 2017, equivalent to 118 percent of the target that was set in the 2017 state budget.
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