At least one in four firms in Indonesia evaded tax last year, according to a World Bank survey.
The survey, highlighted in the bank’s December edition of Indonesia Economic Prospects report, showed that tax evasions in Southeast Asia’s largest economy were likely influenced by the companies’ perception of a common practice in the system and administration.
“The taxpayers’ trust on, or the complexity of the tax system may play a role in determining their choice of committing an evasion,” said Rong Qian, a senior economist at the World Bank, at the report launch event in Jakarta on Monday.
Indonesia also conducted on average much fewer audits per million of population during the 2018-2021 period compared with other countries in the similar income group levels, according to the World Bank report.
The survey outcome indicates an issue of inefficiency in the Indonesian economy often raised by President Prabowo Subianto during his election campaign. Upon taking office in October, he instructed the finance ministry to optimise state income and find new revenue sources.
He also pledged to pursue fiscal reforms by collecting more, spending better, and using more innovative financing measures to achieve his 8% annual growth target.
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The World Bank still expects Indonesia’s economic growth of 5.1% in 2025 and 2026 each on stronger consumption and rollout of the national priority programmes after chalking a 5% expansion this year, according to the report.
Risks around the projection are heightened by rising geopolitical tensions, trade tensions between US and China and a delay in policy reforms.
