World Bank supports tax reform in Indonesia

26 July, 2017 | Source: Antara News

President of the World Bank group, Jim Yong Kim, here on Tuesday expressed his support to the Indonesian governments plan on the tax reform program, which aimed to increase the state budgets income.

"The tax reform remains a crucial matter. To enforce the measure would be difficult, but it is important," Kim noted in his opening remark on "Indonesia Infrastructure Finance Forum" in Jakarta.

Kim further explained that the program would contribute to the infrastructure development.

However, the Indonesian government now, according to Jim, was still struggling to generate tax from people due to various reasons.

As a result, the countrys tax ratio declined by 11.4 percent in 2012 to 10.4 percent against the Gross Domestic Product (GDP) in 2016.

"Amid its large potentiality, the countrys tax revenue only reached less than 50 percent. The Indonesias tax ratio was lower than Philippine and Cambodia; the two latter countries, in fact, also have similar problems as Indonesia," Kim explained.

Therefore, any attempts to reform the taxation scheme in Indonesia should be supported, in order to ensure the funding of the infrastructure development, he reiterated.

Apart from the lack in tax revenues, the development process in Indonesia was obstructed by the inefficient public spending and the low target on the budgets deficit by only three percent against GDP.

"Hence the World Bank would laud any measures on tax reform imposed by the Indonesian government. We recognize the authoritys commitment to increase the tax ration as well as tightening the gap of funding the infrastructure development," Kim remarked.(*)

 

The Indonesian government plans to issue savings sukuk (Islamic bonds), series ST007, to expand the base of retail investors in the domestic financial market and finance green projects in the state budget (APBN).
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