Jakarta. The Asian Development Bank (ADB) announced Thursday that it had green-lit a $500 million policy-based loan for Indonesia to improve its tax collection.

The financial support comes at a time when Jakarta struggles with its annual tax revenue target, coupled with some mishaps surrounding the Coretax digital taxation platform.

“By modernizing tax administration through digitalization and strengthening international tax cooperation, Indonesia will be better positioned to finance its development priorities, while maintaining macroeconomic stability,” Jiro Tominaga, ADB’s country director for Indonesia, said.

The budget support will help Indonesia integrate reforms with its national medium-term development plan. It also aims to boost revenue generation by improving tax administration efficiency, including in regards to the Coretax system, which has faced some challenges. Indonesia is banking on Coretax -- which entered operations in early 2025-- to streamline its tax administration, even spending approximately Rp 1.2 trillion ($74.4 million) to develop the system. However, the platform came under fire upon launch due to technical malfunctions. 

The policy-based loan also aims to put Indonesia in a better position in international tax cooperation. Tominaga said that the program could assist Indonesia in supporting the global initiative of making sure multinational corporations pay their fair share of taxes. According to ADB, the reforms will also slash compliance costs for businesses in Indonesia by further streamlining processes for value-added tax refunds, which have posed an issue for the country’s small and medium enterprises.

The $500 million loan is also the first of the three subprograms under ADB’s so-called Domestic Resource Mobilization Program for Indonesia. 

ADB’s estimates showed that this first subprogram could add Indonesia’s tax-to-gross domestic product (GDP) ratio by 1.28 percentage points by 2030. The intergovernmental organization OECD reported that Indonesia’s tax-to-GDP ratio stood at 12 percent in 2023, far below the Asia-Pacific’s average of 19.5 percent. Jakarta is also behind OECD’s average of 33.9 percent. 

According to local media reports citing the Finance Ministry’s data, Indonesia had collected Rp 996 trillion (approximately $61.8 billion) in tax revenue as of August 11 this year. This is only 45.51 percent of Indonesia’s target for this year, which totals a whopping Rp 2,189.3 trillion.