Indonesia has begun to see results from its sweeping tax overhaul. Sri Mulyani’s tax reforms have helped reverse a downward trend in tax revenue, culminating in a notable turnaround in March 2025. Finance Minister Sri Mulyani Indrawati announced a 9.1% increase in tax revenue, a sharp contrast to the declines recorded in the first two months of the year.
The country faced a 13% drop in tax revenue in January, followed by a smaller contraction of 4% in February. However, March figures reflected a robust recovery. “If we look at March, our gross tax revenue has already turned around—from a growth of minus 13% in January, to minus 4% in February, and now it’s a positive 9.1%. The turnaround is clearly starting to look good,” Sri Mulyani said during the Economic Dialogue with the President of the Republic of Indonesia on April 8, 2025, as cited by Detik.com.
Tax Revenue Shows Strong Recovery in March
March’s figures mark a significant shift in Indonesia’s fiscal landscape. The rebound in revenue signals that earlier contractions were short-lived and that recent policy adjustments may be delivering results. The Ministry of Finance delayed its February 2025 press conference to ensure data accuracy, particularly given the dynamic nature of the newly implemented tax systems.
Sri Mulyani addressed the delay by stating, “The data was still very fluid, very dynamic. Due to Coretax implementation, as well as the application of the Average Effective Rate (TER) and some major corporate taxpayers filing one-off tax restitutions. We didn’t want to trigger market panic.”
Sri Mulyani’s Tax Reforms Show Tangible Impact
Central to the rebound is the package of reforms spearheaded by Sri Mulyani herself. These reforms aim to increase efficiency, boost compliance, and modernize Indonesia’s tax administration. Shortening audit periods, accelerating VAT refunds, and eliminating unnecessary inspections are among the changes now in place.
According to the finance minister, “Our Coretax is improving, which will accelerate auditing processes, appeals, and even validation from institutions via services.” These enhancements are already helping tax offices work faster and more accurately. Moreover, for personal taxpayers with refund claims under IDR 100 million, no audit is now required. For other cases, Coretax enables automatic VAT overpayment refunds.
Coretax System Implementation Indonesia Speeds Processes
The Coretax system is central to the government’s administrative overhaul. It streamlines documentation, speeds up tax restitution, and provides more reliable validation methods. These improvements not only reduce bureaucracy but also ease complaints from business entities, including international investors.
Sri Mulyani noted, “This will make documentation easier, so processes like tax restitution will be faster. That’s one of the potential complaints highlighted by the USTR regarding Indonesia.”
Beyond speeding internal operations, the system supports group taxpayer audits, especially those involving transfer pricing. The duration for such audits has been reduced from two years to just ten months, enhancing efficiency across the board.
Addressing Trade Tariffs and Investor Concerns
The tax system reforms are also Indonesia’s response to external pressures. The United States, under President Donald Trump, recently imposed a 32% tariff on Indonesian goods. The move followed claims of unfair trade practices.
Sri Mulyani stated, “This greatly impacts company cash flow. We’ve also addressed the issue of customs valuation, which had been a complaint from businesses, including those from the U.S., by basing it on a more valid price range.”
These policy changes aim to restore trust and demonstrate Indonesia’s commitment to fair, transparent trade practices.
Balancing Growth and Fiscal Responsibility
Despite ambitious programs proposed by President Prabowo Subianto, Sri Mulyani assured the public that the state budget remains on solid ground. “In the past month, headlines have been made to give the impression that the APBN (Indonesia’s State Revenue and Expenditure Budget) is unsustainable and imprudent, suggesting it would collapse. That is not true. The President indeed has many programs, but all of them were designed within a prudent and sustainable state budget,” she said.
Additional reforms include the elimination of import quota rules and a shift toward post-border supervision supported by a national logistics ecosystem. These efforts simplify trade processes and improve transparency without harming state revenue.
Reform Momentum Signals Fiscal Confidence
March’s tax revenue rebound suggests that Sri Mulyani tax reforms are taking hold. With administrative systems improving and fiscal policy staying disciplined, Indonesia is positioning itself for stable economic growth amid global uncertainties.
Source: finance.detik.com, cnbcindonesia.com
Image infobanknews.com/ Erman Subekti
