Coretax Potential and the Courage to Broaden the Tax Basis

FOLLOWING a shortfall of approximately IDR271 trillion in 2025, the State Budget (anggaran penerimaan dan belanja negara/APBN Indonesian) 2026 tax revenue target has been set at an ambitious IDR2,357.7 trillion. That figure represents an increase of nearly 23% from the 2025 tax revenue realisation of IDR1,917.6 trillion.

This fiscal pressure risks giving rise to a longstanding dilemma: further exploring the potential of compliant and identified taxpayers. Such an approach, however, risks becoming counterproductive, as it may increase the burden on those already compliant, undermine perceptions of fairness and potentially suppress economic activities.

Indonesia genuinely needs the courage to broaden the scope of supervision: uncovering new revenue potential through a wider and fairer tax basis, supported by inclusive digitalisation.

Our Fiscal Challenges

The principal issue with our taxation is not the level of rates but the narrowness of the tax basis. Many real economic activities have yet to be fully captured on the state's radar.

The macro-fiscal scorecard records this disparity plainly. Indonesia's tax ratio stands at only around 12%, well behind the Asia-Pacific average of 19.5% as noted by the OECD (2025/2026).

The combined tax gap for VAT and corporate income tax reaches 6.4% of the GDP, equivalent to approximately IDR944 trillion per year, whereas developed countries manage to keep it below 2–3% (World Bank, 2016–2021 cycle).

Meanwhile, the informal worker sector continues to dominate, accounting for 59.42%, or 87.74 million people, far exceeding the G20's ideal target of below 30% (Statistics Indonesia or Badan Pusat Statistik/BPS in Indonesia, February 2026). These records indicate that six in ten workers are in the informal sector.

A World Bank report confirms that non-compliance accounts for 58% of lost revenue potential from VAT and corporate income tax. The contrast is stark: the gross merchandise value (GMV) of the digital economy exceeded approximately IDR1,430 trillion in 2024 (Google-Temasek-Bain), yet digital economy tax revenue reached only IDR33.56 trillion as of February 2025 (Directorate General of Taxes/DGT). Real economic activities remain far from optimally captured.

This shadow economy phenomenon aligns with the findings of Medina & Schneider (2018) that in developing countries, the informal sector expands because the risk of detection is low, whilst the cost of formal compliance is relatively high. Consequently, some entrepreneurs choose to operate outside the formal system.

This cycle can only be broken through better information design. Kleven et al. (2011) and Pomeranz (2015) demonstrated that organic compliance emerges when transaction data automatically cross-checks itself, rather than solely through the threat of audit.

This is where Indonesia's latest core tax administration system — Coretax DGT — must assume its historic role.

Testing the Resolve of Three Transformation Agendas

The full launch of Coretax through the Minister of Finance Regulation (MoF Reg.) 81/2024 should mark a turning point. Coretax must not stop at being merely an information technology renewal project; it must become a modern fiscal infrastructure that changes how the state interprets its economic anatomy. In pursuit of a fair APBN 2026 target, three tactical agendas warrant examination.

First, transforming coretax into an instrument for broadening the tax basis, not merely a data collector. According to Keen & Slemrod (2021), digitalisation will not curb tax leakage without reforming the way compliance risk is managed.

Therefore, third-party data must be integrated to compile a precise compliance map. This also aligns with the view of Basri et al. (2021), who state that risk-based supervision may increase revenue without disrupting business activities.

Through the coretax, the segmentation must be clear: simplifying processes for compliant taxpayers, educating taxpayers that do not yet understand their obligations and taking action against those who deliberately commit violations.

Second, bringing the informal sector into the net through interoperability, not through an approach that raises concerns. The informal sector has grown not solely due to bad intent, but also because formal administrative processes are still perceived as complex.

Financial digitalisation, in fact, opens up opportunities. By the first half of 2025, the QRIS payment system had already reached 57 million users and 39.3 million merchants. Of that figure, 93.16% are micro, small and medium enterprises (MSMEs), with total transactions reaching IDR579 trillion.

This significant trail can be utilised without creating a negative perception, i.e., by embedding tax collection directly into digital platform systems, such as e-commerce, ride-hailing applications and electronic point-of-sale systems that run automatically in the background.

This approach has been proven in São Paulo, Brazil. Naritomi's (2019) study showed that by incentivising consumers to request receipts, net tax revenue rose by 9.3% as the public effectively acted as organic auditors.

Domestically, Bank Indonesia recorded 38.1 million MSMEs using QRIS as of the first quarter of 2025. Clean and instantaneous transaction records can help banks assess creditworthiness and open access to financing that has hitherto been limited.

Accordingly, MSMEs that enter the DGT system could serve as a gateway to enhancing business capacity, rather than merely becoming subjects of audit.

Third, capturing value in the era of the cross-border economy by having the courage to look upward. Broadening the tax basis will feel unjust if the state actively reaches out to small-scale entrepreneurs, whilst remaining less than optimal in overseeing multinational corporations that shift profits overseas.

Through MoF Reg. 136/2024 and PER-6/PJ/2026, Indonesia has the potential to collect up to IDR4.49 trillion from the global minimum tax. Many countries have already taken this path, each with its own approach.

Germany, for instance, limits base erosion through interest expense rules. Australia actively pursues profits shifted to low-tax jurisdictions. Canada links tax incentives to research activities that are genuinely carried out, whilst Singapore maintains a minimum effective rate of 15% that preserves its attractiveness to investment.

Meanwhile, India and Peru have tightened reporting through electronic invoicing. According to Bellon et al. (2022), these measures by India and Peru increased corporate tax filing by more than 5% in the first year by reducing information asymmetry.

Calling in the Social Contract

Ultimately, broadening the tax basis is not merely a technocratic exercise or a matter of figures on paper. It constitutes the means of strengthening the social contract between the state and its citizens. Alm & Torgler (2006) show that voluntary compliance grows strongly when the public believes that taxes genuinely work in the common interest.

Society is willing to contribute when it tangibly experiences the results: equitable education, inclusive healthcare and infrastructure capable of reducing logistics costs.

Under the pressure of the 2026 fiscal target, a robust tax authority is not one that pursues existing taxpayers with ever-more-intensive approaches, but one that possesses the digital capacity and intelligence to map previously invisible economic activity into something measurable, fair, and accessible.

It is time we stopped chasing the same taxpayers over and over again. The full operation of the coretax since 2025 must serve as proof that tax reform is not merely about chasing revenue, but about building a fair fiscal civilisation that is trusted to work for society. (rig)

* This opinion article represents the personal views of the author and does not reflect the position of the institution in which the author is employed.