The next government is considering to restructure the Ministry of Finance by establishing a new ministry or agency specifically dedicated to managing tax collection and state revenue, a top aide to President-elect Prabowo Subianto says.
Burhanuddin Abdullah, advisor to President-elect Prabowo Subianto, has revealed the plan which was discussed during the UOB Economic Outlook 2025 event, which was broadcast on YouTube on Wednesday, July 25, 2024
According to Burhanuddin, the restructuring will separate the Directorate General of Taxation and the Directorate General of Customs and Excise from the Ministry of Finance. These two agencies will be placed under the newly established Ministry of State Revenue.
“God willing, there will be a minister of state revenue who will oversee taxes, customs, and non-tax state revenue (PNBP). This will be separated from the Ministry of Finance,” Burhanuddin, a former Governor of the Indonesian Central Bank (BI), said.
He emphasized the need for institutional transformation within state-owned enterprises (SOEs), noting that SOEs’ contribution to the state could reach US$1 trillion (Rp15 trillion), which amounts to 60 percent of Indonesia’s GDP.
Hence, reforms in institutional structure, business operations, culture, and management are necessary to boost SOEs’ performance.
However, the plan to establish the Ministry of State Revenue has caught the attention of international bodies. The International Monetary Fund (IMF), in its Article IV of Consultation report released on August 7, 2024, cautioned the Indonesian government to proceed carefully.
The IMF warned that creating a new state revenue body (BPN) would require substantial funding and that such restructuring could be costly.
“The plan to form the BPN must be carefully designed because this restructuring could prove expensive,” the IMF stated in its report.
The IMF also stressed the importance of improving tax collection and other forms of state revenue. The report highlighted the need to address administrative gaps in the tax system through measures such as compliance risk management, digitization, and broadening the taxpayer base.
Additionally, the IMF recommended that the government review current tax expenditures, which are estimated to account for 1.7 percent of GDP.
Limiting tax exemptions and incentives will be crucial to prevent erosion of the tax base and secure increased revenue in the medium term.
