Indonesia's Underground Economy: The Urgent Need for Customs Reform

Significant Revenue Losses

Indonesia is facing substantial revenue losses due to the persistent issue of underground economy activities, particularly through the practice of underinvoicing in international trade. This practice involves deliberately misrepresenting the value of imported goods in trade documents, resulting in significantly reduced customs duties and tax payments. The issue has gained significant attention following recent findings of discrepancies in Indonesia-China trade data, which highlighted the magnitude of the problem in the export-import sector.

Economic Impact and Government Response

The economic implications are severe, with the government facing billions in lost revenue that could have been used for critical public services and infrastructure development. The issue has prompted strong reactions from both economists and government officials. President Prabowo Subianto has gone so far as to threaten to disband the DJBC unless significant improvements are made. This ultimatum has added urgency to the calls for comprehensive reform within the customs and excise department.

Systemic Challenges and Reform Needs

The underinvoicing issue reveals deeper systemic problems within Indonesia's customs administration. Experts point to inadequate monitoring systems, complex regulations, and insufficient enforcement capacity as key factors enabling these practices. To effectively address these challenges, a multi-faceted reform approach is required, including modernizing customs procedures, enhancing data analytics capabilities, and strengthening inter-agency collaboration.

Path Forward

The current situation presents both a challenge and an opportunity for Indonesia's economic management. Implementing comprehensive reforms in the DJBC could not only help recover lost revenue but also improve the overall business environment by creating a more transparent and efficient customs process. As the government moves forward, balancing enforcement with trade facilitation will be crucial to achieving sustainable improvements in revenue collection and economic integrity.