Economist Suggests Government Evaluation Of Tax Incentives

Illustration. (Photo: Doc. Antara)

JAKARTA - Executive Director of the Center of Economic and Law Studies (Celios) Bhima Yudhistira advised the government to evaluate all tax incentives to suppress potential loss or reduced tax revenues.

"I think that must be evaluated so that if the tax incentive is more targeted, the potential loss from the tax can be reduced. That's the easiest to do now," said Bhima, quoted by Antara, Tuesday, March 18.

Based on data from the Ministry of Finance (Kemenkeu), tax incentives in 2023 will reach IDR 362.5 trillion or 1.73 percent of gross domestic product (GDP).

This value increased by 6.3 percent compared to the 2022 fiscal year (TA) which amounted to Rp341.1 trillion or 1.74 percent of GDP.

"It (tax incentives) have not been on target. We ask for it to be re-evaluated. Tax holidays, then tax allowances. Especially now that there is a global minimum tax, so we can't give 0 percent corporate income tax, it can't be done now," said Bhima.

In addition to the tax incentive evaluation, Bhima said that Celios has always supported the government immediately to encourage the implementation of new taxes such as carbon taxes, wealth taxes on 2 percent of individual high net worth assets, as well as inheritance tax reforms.

"Then taxes related to property or housing, it must be evaluated," he said.

Bhima also advised the government to conduct an audit of the beliax system, including the recommendations for revamping the beliax.

This can be done, for example by doing a pilot project first before it is actually implemented massively nationally.

"So there is a time of 1-2 years for a mature trial period (on the graffiti)," he said.

According to him, improving the beliax is important because this system not only concerns the smooth process of applying for taxes, paying taxes, and reporting taxes but also the trust of investors and foreign business actors in the Indonesian tax system.

Tax revenue from January to February 2025 was recorded at IDR 187.8 trillion, based on data from the Ministry of Finance. This figure decreased significantly when compared to the realization in the same period last year of IDR 269.02 trillion.

Bhima assessed that there are two major indications of a sharp decrease in tax revenues, one of which is related to tax administration issues.

He agrees that seasonally tax revenues at the beginning of the year are usually low. However, he reminded that the tax administration problem, namely the beliax, could not be released as a factor in reducing tax revenues at the beginning of this year.

This Coretax has a dominant role, because usually the beginning of the year can get 60 million tax invoices a month. But because there is a transition to beliax, it will be 20 million tax invoices. The decline is far away too. So there are things that need to be resolved with this quintex problem," said Bhima.

In addition to the beliax problem, tax administration problems that affect the reduction in tax revenues also include the application of an average effective tariff (TER).

Then another indicator, Bhima added that tax revenues that fell in early 2025 could not be separated from the ongoing economic situation where the prices of the main commodities decreased.

He also highlighted the layoffs (PHK) that occurred in January-February 2025. With the number of layoffs that occurred, he added, the income tax (PPh) was also low.

Then the manufacturing industry, which usually contributes 30 percent to total tax revenues, now only 25 percent. This means that there is a lower quality of the manufacturing industry," said Bhima.