Mitsuhiro Furusawa, the International Monetary Fund's deputy managing director and Finance Minister Sri Mulyani Indrawati in a press conference on the sidelines of the Joint IMF-Indonesia High-Level Conference in Jakarta on Wednesday (12/07). (JG Photo/Tabita Diela)

Finance Minister to Increase Ratio of Taxes to GDP Target to 16% by 2019

BY :TABITA DIELA

JULY 12, 2017

Jakarta. Finance Minister Sri Mulyani Indrawati said on Wednesday (12/07) that Indonesia will increase the ratio of taxes to gross domestic product target to 16 percent by 2019  from 10.3 percent currently as part of the government's plan to reform the tax system.

"It is related to the president's aspiration to create an inclusive and equal economic policy," Sri Mulyani told reporters on the side of the Joint IMF-Indonesia High-Level Conference in Jakarta.

"We do realize that we need to increase the tax ratio without burdening the economy amid the ongoing tax reform," she said.

The Directorate General of Taxes has started the reform process internally by simplifying its IT systems and administration and business processes to increase tax revenue.

The finance minister also said that the government will increase tax revenue by working with foreign authorities to prevent tax evasion.

"Corporations have been able to take advantage of those loopholes [...] through aggressive tax planning, implementing tax transfer pricing to minimize their tax liability or in some cases even paying no tax at all," she said.

Recently, the government reached a tax settlement with Alphabet's Google following a months-long dispute over allegations that the tech giant had not paid enough annual payments to the government.

"Globalization and deeper interregional integration mean that we need new rules and cooperation around international tax challenges," she said.

Indonesia is not the only Asian economy that is struggling with low tax collection to support its ambitious development plans, Mitsuhiro Furusawa, the International Monetary Fund's deputy managing director said at the same event.

"Along with most other Asian countries, Indonesia needs to collect more tax and avoid itself from tax competition with other countries," Furusawa said.

"I think it's a very very ambitious target but I hope you can achieve that [...] There are various options and IMF fully supports your effort," Furusawa said on the sidelines of the event, commenting on the government's target.

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