Jakarta. Indonesia’s tax revenue tumbled 41.86 percent year-on-year in January to Rp 88.89 trillion ($5.42 billion), as businesses and taxpayers struggled with the rollout of the government’s new Core Tax Administration System (Coretax).

The sharp decline, compared with Rp 152.89 trillion collected in January 2024, comes as the government seeks to modernize tax collection and enforce a planned value-added tax (VAT) hike to 12 percent on luxury goods. The decline raises concerns over the government’s ability to meet its ambitious full-year tax revenue target of Rp 2,189.31 trillion, a 13.29 percent increase from 2024.

A government report, APBN KiTa (State Budget Performance and Facts) February 2025 edition, attributed the drop to weaker domestic VAT collection and a slowdown in corporate income tax receipts. Corporate income tax revenue fell to Rp 4.16 trillion, while domestic VAT revenue dropped to Rp 2.58 trillion as of the end of January.

Despite the overall decline, tax revenue from import VAT, payroll tax (PPh 21), and final income tax provided crucial support. Import VAT contributed Rp 20.21 trillion, accounting for 22.74 percent of total tax receipts, driven by increased levies on raw materials, particularly in the food industry. Payroll tax brought in Rp 15.95 trillion, or 17.94 percent of total revenue, helped by the implementation of an effective tax rate scheme. Final income tax, including levies on deposit interest, bond discounts, and real estate rentals, amounted to Rp 11.57 trillion.

Manufacturing, financial services, and mining sectors remained the biggest contributors to tax revenue, collectively accounting for 52.4 percent of January’s tax collection. The manufacturing sector led with Rp 23.25 trillion in taxes, followed by financial services at Rp 13.62 trillion and mining at Rp 10.18 trillion.

The APBN KiTa report, initially published on the Finance Ministry’s website on the morning of March 12, was later removed without explanation. The ministry later stated that the official report would be released on March 13 at 10 a.m. local time, citing the need for final verification.

Coretax's Costly and Problematic Implementation

Initially, the Coretax System was designed to be more efficient and provide convenience for both taxpayers and tax officials. However, in practice, many taxpayers have faced difficulties accessing the system.

The Core Tax Administration System (Coretax) project in Indonesia has a total estimated cost of Rp 1.73 trillion, with the winning bid from LG CNS, a subsidiary of LG Corporation from South Korea, valued at Rp 1.22 trillion. The project is financed through the Finance Ministry's budget from 2020 to 2024.

The procurement process was managed by PricewaterhouseCoopers (PwC), and Deloitte Consulting was appointed as the consultant for project management and quality assurance.