AMRO: Indonesia to Broaden Tax Base and Improve Expenditure Efficiency
JAKARTA, DDTCNews — The ASEAN+3 Macroeconomic Research Office (AMRO) has proposed two reform measures for Indonesia to ensure fiscal sustainability.
AMRO, through its official statement, noted that Indonesia still needs to mobilise revenues whilst improving budget expenditure efficiency. In terms of expenditures, Indonesia needs to reform subsidy policy and cut non-priority expenditures.
"Further improvements in tax administration and compliance, together with measures to broaden the tax base and introduce new sources of revenue, would strengthen domestic revenue mobilization," AMRO stated in its official release, cited on Monday (31/8/2026).
In terms of expenditures, Indonesia is deemed to need to reformulate its subsidy policy as well as cut non-priority spending.
"More targeted energy subsidies, continued rationalization of non-priority spending, and greater efficiency in the priority programs would help create fiscal space for social assistance and infrastructure investment," AMRO explained.
At present, AMRO noted that Indonesia has carried out efficiency measures across various categories of expenditures amidst a surge in subsidy burdens. This measure has been undertaken to maintain the budget deficit below 3% of GDP.
"Overall, in 2026, the fiscal deficit is projected to remain at 2.8 percent of GDP, as revenue gains from improved tax administration are expected to offset higher fiscal spending on energy subsidies and the implementation of priority programs," AMRO wrote.
For information, the government, through the First Semester Report on the 2026 state budget (anggaran penerimaan dan belanja negara/APBN in Indonesian), disclosed that the budget deficit this year is expected to reach IDR734.3 trillion, or 2.85% of GDP. The deficit arises from a surge in expenditure amid projections of a tax shortfall.
This year, tax revenue is estimated to reach only IDR2,310.8 trillion. Although this represents growth of 20.8% compared with last year's tax revenue, the tax shortfall this year is projected to reach IDR46.9 trillion. (rig)
