JAKARTA – The head of research at the Center for Indonesian Taxation Analysis (CITA), Fajry Akbar, has strongly advocated for the Indonesian government to adopt a more pragmatic approach to fiscal policy, recommending a reduction in tax revenue targets coupled with increased spending efficiency. This call comes as the nation grapples with a persistent slowdown in business activity and weakened public purchasing power, conditions that Akbar argues render aggressive revenue optimization efforts largely unrealistic. His statements, made in Jakarta on Saturday, July 18, 2026, underscore a critical tension between the government’s need for revenue and the prevailing economic realities faced by taxpayers.
Akbar highlighted that pushing for higher tax collections without a significant improvement in the underlying tax base is an unsustainable strategy. He pointed to data from the International Labour Organization (ILO), which indicates that the average income of Indonesian workers remains among the lowest in ASEAN. "If we use ILO data, the average income of workers in Indonesia is among the lowest in ASEAN. It is therefore reasonable that our tax ratio is also one of the lowest in ASEAN," Akbar stated, drawing a direct correlation between income levels and the nation’s capacity for tax generation. Indonesia’s tax ratio, typically hovering around 10-11% of its Gross Domestic Product (GDP), consistently lags behind regional peers such as Malaysia (averaging 13-15%) and Thailand (16-17%), let alone the OECD average which often exceeds 30%. This disparity highlights a fundamental challenge in expanding the tax base and improving compliance within the current economic structure.
The Economic Landscape and Tax Collection Realities
The first half of 2026 has seen Indonesia’s economy largely propped up by government spending, according to Akbar. This reliance on public expenditure for growth suggests that the private sector is still struggling to regain robust momentum. In such an environment, Akbar proposed a targeted approach to tax supervision, focusing on sectors that directly benefit from this government spending. "What drove the economy in the first semester? Mostly government spending. Who enjoys government spending? Entrepreneurs involved in government procurement and related sectors. Those are the ones whose taxes should be pursued," he asserted. This strategy aims to ensure that those directly profiting from state-funded projects contribute proportionally to the national coffers, rather than broadly burdening a struggling populace and business community.
The economic context leading to these recommendations is multifaceted. Global economic headwinds, including persistent inflation, volatile commodity prices, and geopolitical uncertainties, have impacted Indonesia’s export performance and investor confidence. Domestically, while the nation has made strides in post-pandemic recovery, consumer spending, a crucial engine of growth, has yet to fully rebound. Small and medium-sized enterprises (SMEs), which form the backbone of the Indonesian economy, often operate on thin margins and are particularly vulnerable to increased tax burdens or aggressive enforcement. Fajry Akbar’s counsel for fiscal efficiency aligns with the broader principle of sustainable economic management, suggesting that reduced but realistic revenue targets, coupled with judicious spending, could foster greater stability and long-term growth by easing pressure on businesses and households.
DJP’s Expanded Surveillance: A Double-Edged Sword?
Akbar’s comments came amidst significant developments within the Directorate General of Taxes (DJP). The DJP recently issued Circular Letter (SE) Number SE-8/PJ/2026, outlining new guidelines for expanding taxpayer compliance supervision. This beleid marks a notable shift in the DJP’s enforcement strategy, aiming to leverage advanced technology and broaden its data collection scope down to the village level.
The new guidelines detail a comprehensive approach that goes beyond traditional direct visits to taxpayers. The DJP plans to utilize sophisticated technological tools such as remote sensing and web scraping. Remote sensing technology, typically involving satellite imagery and aerial photography, can be employed to monitor property developments, assess land use changes, and identify undeclared business activities. Web scraping, on the other hand, allows for the automated extraction of data from public websites, potentially capturing information on e-commerce transactions, business listings, and even lifestyle indicators that might suggest undeclared wealth.
Perhaps the most contentious aspect of the new strategy is the DJP’s plan to build information networks by collaborating with Bintara Pembina Desa (Babinsa) and Bhayangkara Pembina Keamanan dan Ketertiban Masyarakat (Bhabinkamtibmas). These are non-commissioned officers from the Indonesian Army and Police, respectively, who are stationed at the village level to maintain security and order. Their involvement is intended to broaden the taxation database, tapping into local knowledge and community networks to identify potential taxpayers, particularly in the informal sector and rural areas that have traditionally been difficult to reach.
CITA’s Concerns: Data Quality, Disputes, and Militarization
Fajry Akbar expressed significant reservations about the DJP’s expanded surveillance methods. He emphasized that the onus is on the DJP to prove that the data collected genuinely represents untapped tax potential. Failing to do so, he warned, could lead to an increase in disputes with taxpayers. "It will definitely lead to new disputes, especially if the data quality is low or if tax officials have different interpretations of the data," Akbar cautioned. The potential for discrepancies arising from imperfect data, coupled with varied interpretations of complex tax regulations, poses a substantial risk of administrative burdens and legal challenges for both taxpayers and the tax authority. This could erode trust in the tax system and create an environment of uncertainty for businesses.
The involvement of Babinsa and Bhabinkamtibmas drew particular scrutiny from Akbar. He called for greater clarity from the DJP regarding the precise meaning and boundaries of this "information network development." The lack of detailed explanation in the circular letter, he argued, raises several red flags. "Unfortunately, this circular letter does not explain what is meant by the development of such information networks, nor its boundaries. On one hand, this creates a militaristic impression in tax collection, which should primarily be a civilian domain. On the other hand, it raises concerns for MSME actors in rural areas," Akbar stated.
The notion of a "militaristic impression" is particularly sensitive in Indonesia, given historical contexts where military and police forces have occasionally been involved in civil affairs, sometimes leading to accusations of overreach or intimidation. In the context of tax collection, the involvement of security personnel could be perceived as coercive, potentially creating fear among ordinary citizens and small business owners, rather than fostering a culture of voluntary compliance. For vulnerable MSMEs in remote areas, who may already lack a full understanding of tax obligations or access to professional advice, such direct involvement by uniformed personnel could be particularly intimidating, potentially leading to arbitrary assessments or undue pressure. The privacy implications of such widespread data collection, especially through informal networks at the village level, also warrant careful consideration in light of Indonesia’s recently enacted Personal Data Protection Law.
Broader Implications and Stakeholder Perspectives
The debate ignited by CITA’s recommendations and the DJP’s new policies highlights a critical juncture for Indonesia’s fiscal policy. On one hand, the government is under immense pressure to increase state revenue to fund ambitious development programs, social safety nets, and to reduce its budget deficit. The DJP, as the primary revenue collection agency, is tasked with optimizing tax collection, broadening the tax base, and combating tax evasion, which is a persistent challenge in an economy with a significant informal sector.
From the government’s perspective, the use of technology and community engagement is likely seen as a necessary evolution in tax administration. Digitalization promises greater efficiency, transparency, and the ability to detect non-compliance more effectively. The argument for engaging Babinsa and Bhabinkamtibmas might stem from the recognition that these local figures possess unparalleled grassroots knowledge and access, which could be invaluable in reaching previously untaxed segments of the population and addressing the persistent issue of under-declaration.
However, the business community, represented by organizations such as the Indonesian Chamber of Commerce and Industry (Kadin) and the Indonesian Employers Association (Apindo), typically advocates for a tax system that is predictable, fair, and conducive to investment and economic growth. Any perception of arbitrary enforcement or excessive scrutiny can deter investment and stifle entrepreneurship. These groups would likely echo CITA’s call for clear guidelines, robust data validation processes, and an emphasis on educating taxpayers rather than solely relying on enforcement.
Civil society organizations and taxpayer rights advocates would undoubtedly raise concerns about potential abuses of power, data privacy, and the importance of maintaining a clear distinction between the roles of security forces and civilian tax administrators. They would stress the need for transparent mechanisms for dispute resolution and avenues for taxpayer redress in cases of incorrect assessments or intimidation.
Moving Forward: A Call for Balance and Clarity
Fajry Akbar’s overarching message is a call for a balanced and realistic approach to tax policy. He argues that overly ambitious revenue targets can inadvertently foster aggressive and potentially counterproductive enforcement practices, creating friction between the tax authority and taxpayers. Instead, a more sustainable strategy would involve setting achievable targets, coupled with a rigorous focus on spending efficiency to ensure that every rupiah collected is utilized optimally for public good.
The need for clarity regarding the DJP’s new surveillance methods, particularly the involvement of security personnel and the scope of data collection, remains paramount. Transparent communication, detailed standard operating procedures, and robust oversight mechanisms will be crucial to mitigate concerns about potential overreach, protect taxpayer rights, and build trust in the tax administration system. Ultimately, a strong and healthy tax system relies not just on effective enforcement, but also on a foundation of fairness, transparency, and public confidence. Indonesia’s journey towards fiscal sustainability will depend on its ability to navigate these complex issues with wisdom and foresight, ensuring that revenue collection efforts genuinely contribute to economic prosperity without unduly burdening its citizens and businesses.
