Executive Summary

Key insights and market outlook

The World Bank recommends Indonesia adopt a more aggressive and proactive tax strategy to maintain fiscal sustainability amid growing deficit risks and potential revenue shortfalls in 2026-2027 ¹

. Key suggestions include digitalization of tax services, data integration, and simplifying reporting procedures to potentially increase revenue by 1% of GDP ¹. Experts advise cautious consideration of these recommendations to ensure balanced implementation.

Full Analysis

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Deep Dive Analysis

World Bank Urges Indonesia to Strengthen Tax Revenue Mobilization

Recommendations for Enhanced Fiscal Sustainability

The World Bank has urged Indonesia to adopt a more aggressive and proactive tax strategy to maintain fiscal sustainability amid growing deficit risks and potential revenue shortfalls projected for 2026-2027 ¹

. In its Indonesia Economic Prospect report released in December 2025, the global institution emphasized the critical need for strengthening revenue mobilization through comprehensive tax administration reforms and digitalization ¹².

Key Recommendations for Tax Reform

Digitalization of Tax Services: Implementing advanced electronic services
Data Integration: Enhancing data sharing between tax authorities
Simplified Reporting Procedures: Streamlining tax compliance processes

These measures are estimated to potentially increase tax revenue by at least 1% of GDP, particularly through Value Added Tax (VAT) and Corporate Income Tax ¹

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Additional Policy Suggestions

The World Bank also recommends:

Adjusting VAT and Corporate Income Tax thresholds which are currently higher than international comparators ²
Source 2
https://nasional.kontan.co.id/news/pengamat-menilai-perlu-hati-hati-adopsi-rekomendasi-bank-dunia-soal-pajak
Broadening the Corporate Income Tax base by removing special rates, certain incentives, and other deductions ²
Source 2
https://nasional.kontan.co.id/news/pengamat-menilai-perlu-hati-hati-adopsi-rekomendasi-bank-dunia-soal-pajak
Reducing VAT exemptions in specific sectors while maintaining tax neutrality ²
Source 2
https://nasional.kontan.co.id/news/pengamat-menilai-perlu-hati-hati-adopsi-rekomendasi-bank-dunia-soal-pajak

Expert Caution on Implementation

While the World Bank's recommendations aim to strengthen fiscal sustainability, experts caution that their adoption requires careful consideration. The implementation of these measures must balance revenue enhancement with potential economic impacts on various sectors ²

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References