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Raising more public revenue in Indonesia in a growth - and equity-friendly way

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  • Christine Lewis

Abstract

Indonesia’s government needs more revenue to fund spending that can boost GDP growth, raise well-being and reduce poverty. The tax-to-GDP ratio is low relative to other emerging market economies. The difficulty is to raise revenues without denting growth or worsening inequality. Successive reforms have modernised the tax administration and increased the number of taxpayers. Nonetheless, raising compliance is an ongoing challenge and investing in the tax administration rightly remains a government priority. There is also scope to improve the design of various taxes. Broadening the bases of income and consumption taxes would raise more revenue and reduce distortions. Expanding property taxation, if appropriately implemented, could provide additional funds for local governments. Taxes can also be used more extensively to discourage activities and behaviours with negative health and environmental externalities. Strengthening property rights and fighting illegal extraction would increase revenues from Indonesia’s natural resource wealth.This Working Paper relates to the 2018 OECD Economic Survey of Indonesia (www.oecd.org/eco/surveys/economic-survey-indonesia.htm).

Suggested Citation

  • Christine Lewis, 2019. "Raising more public revenue in Indonesia in a growth - and equity-friendly way," OECD Economics Department Working Papers 1534, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:1534-en
    DOI: 10.1787/a487771f-en
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    More about this item

    Keywords

    business tax; consumption tax; green taxation; income tax; Indonesia; natural resources taxation; property tax; tax compliance; tax systems;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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