Jakarta. Indonesia is hoping to be on Cambodia’s level when it comes to its tax ratio, according to President Prabowo Subianto’s younger brother Hashim Djojohadikusumo.

Despite being Southeast Asia’s largest economy, Indonesia’s tax revenue-to-gross domestic product (GDP) ratio is significantly underwhelming compared to its ASEAN neighbors. 

Hashim, who boasted that he was privy to government programs, claimed that plans were underway to catapult Indonesia’s tax-to-GDP ratio to at least be on par with Cambodia. This ratio gauges a country's tax revenue relative to the size of its economy. 

“Indonesia has one of the world’s lowest tax ratio. … The government will soon undertake some programs to increase the tax revenue ratio,” Hashim told the Indonesia Economic Summit in Jakarta on Wednesday.

Hashim said:  “Our target is to reach Cambodia’s level [whose tax ratio] is at 18 percent, while ours is between 12.1 and 12.2 percent. … And eventually, we will [reach] Vietnam’s level of around 23 percent.”

According to OECD's latest data, Cambodia's tax ratio stood at 14.7 percent as of 2022, while Vietnam was at 19 percent.  

Past media reports had shown that Indonesia had set a goal to raise the tax ratio from the usual 10 percent to 12.3 percent in 2025. Finance Minister Sri Mulyani even told the country's lawmakers that the national tax ratio only stood at 10.02 percent of GDP as of end-October 2024.

Hashim also told the forum that his brother wanted to boost tax collection from the so-called “shadow economy”. This term refers to economic activities that do not get reported to the government and hence untaxed such as the informal sector.

According to the senior Gerindra politician, Indonesia’s “apparent economy” is around $1.5 trillion. The World Bank calculations, however, show that the shadow economy represents between 25 and 30 percent of the GDP. This brings Indonesia’s real economy -- including these untaxed activities in the shadow economy -- to be worth $1.9 trillion. Indonesia is eyeing to control its substantial shadow economy to spur its tax revenue by using artificial intelligence (AI). 

“If we can capture that 25 percent [of the GDP from the underground economy], which we will by using technologies like AI and electronic monitoring, we should be able to increase [the tax revenue]. Just to give you an example, 6 percent of the $1.5 trillion is $90 billion extra every year. President Prabowo wants to increase our [tax] revenue by $90 billion annually over the next few years,” Hashim said.

“We are optimistic. I’m privy to these programs. We will get there soon.”

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