By: Prabowo Subianto [excerpted from “National Transformation Strategy: Towards Golden Indonesia Emas 2045,” pages 172-173, 4th softcover edition]
Our national revenue consists of both tax and non-tax income (PNBP). It is from these revenues that we fund various government programs – including my proposals for the other 7 “Quick Impact Programs.”
Currently, our tax and non-tax revenues are far from optimal. In 2021, our tax revenue-to-GDP ratio, or tax ratio, was only 9.1%. Our total revenue-to-GDP ratio was just 11.8%.
These figures are low compared to those of our neighboring countries. For instance, in the same year, Cambodia achieved a tax ratio of 16.4% and a revenue ratio of 18.1%. Malaysia reached a tax ratio of 11.2% and a revenue ratio of 15.1%. Thailand performed better than us, achieving a tax ratio of 14.3% and a revenue ratio of 18.5%.
By 2024, our GDP is estimated to reach Rp. 22,786 trillion. This means, with a revenue ratio of only 11.8%, our national income would be merely Rp. 2,700 trillion. However, a 1% increase in our revenue ratio would add Rp. 228 trillion. If we could match Cambodia’s revenue ratio of 18.1%, our income in 2024 would be Rp. 4,142 trillion. In other words, if we could perform like Cambodia, our national revenue would jump 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 finance all the Quick Impact Programs. It could be used to build premier schools in every regency, world-class hospitals in every regency, provide free lunch for all school children, and more.
To clarify, I am not advocating for an increase in the tax rate. What needs to be done is ensuring that the revenue due to the state is actually collected.
Research by the Corruption Eradication Commission (KPK) in 2019 found that revenue leakage was actually greater than budget leakage. Revenue leakage means the discrepancy between what the state should receive and what it actually receives.
It’s not surprising that in 2023, the Financial Transaction Reports and Analysis Center (PPATK) revealed hundreds of trillions in suspicious transactions involving officials at the Directorate General of Taxes. This is what we need to prevent.
Therefore, the country needs concrete breakthroughs to enhance domestic revenue collection. We should separate the body managing state funds from the one handling state revenue.
Like in many other countries, we need to establish a National Revenue Agency. With this agency, the national revenue-to-Gross Domestic Product (GDP) ratio must be increased to 23% to match its potential.
