A new World Bank survey reveals that at least 25% of Indonesian businesses engaged in tax evasion in 2022, Bloomberg reports.
The finding, highlighted in the December edition of the Indonesia Economic Prospects report, points to systemic issues within the country’s tax administration.
The survey suggests that widespread perceptions of tax evasion as a common practice, coupled with the complexity of the tax system, contribute significantly to the problem.
“The taxpayers’ trust on, or the complexity of the tax system may play a role in determining their choice of committing an evasion,” explained Rong Qian, a senior World Bank economist, at the report’s launch in Jakarta on Monday.
The report also notes that Indonesia conducted considerably fewer tax audits per million people between 2018 and 2021 compared to countries with similar income levels, further highlighting inefficiencies in tax collection.
The findings underscore a key economic concern frequently raised by President Prabowo Subianto during his election campaign. Since assuming office in October, President Subianto has instructed the finance ministry to boost state revenue and explore new revenue streams. He has pledged comprehensive fiscal reforms, aiming to improve tax collection, optimize government spending, and employ innovative financing methods to achieve his ambitious 8% annual economic growth target.
Despite the significant tax evasion issue, the World Bank maintains a positive outlook for Indonesia’s economic growth, projecting a 5.1% expansion in both 2025 and 2026, driven by strong consumption and the implementation of national priority programs. The country’s economy expanded by 5% this year.
