Jakarta. Indonesian think tank CORE Indonesia has warned of mounting pressure on the country’s fiscal structure that could leave tax revenue as much as Rp 484 trillion ($27.9 billion) below target by the end of 2026.

CORE's Research Director, Akhmad Akbar Susanto, said recent tax revenue growth remains heavily driven by temporary factors rather than structural improvements.

“The risk of a shortfall ranging from Rp 171 trillion to Rp 484 trillion shows that fiscal space throughout 2026 remains fragile. This wide range reflects high uncertainty over the state’s revenue capacity,” Akhmad said during the presentation of the Quarterly Economic Review Q1-2026 in Jakarta on Wednesday.

Data from the Finance Ministry showed first-quarter 2026 tax revenue rose 20.7% year-on-year to Rp 394.8 trillion. However, the pace slowed compared with January and February, when growth exceeded 30%.

With this year’s tax revenue target set at Rp 2,357.7 trillion ($136 billion), collections in the first three months have reached only 16.7% of the annual goal.

Akhmad noted that the main driver of first-quarter growth came from Value Added Tax (VAT) and luxury goods sales tax receipts, which totaled Rp 155.6 trillion, surging 57.7% from a year earlier.

According to him, the sharp increase in early-year tax revenue was largely the result of temporary factors rather than more established drivers such as a broader tax base, stronger taxpayer compliance, solid economic activity, or sustainably improved tax administration.

“First-quarter 2026 tax growth should not be interpreted as meaning state revenue is secure for the full year. There are some early signs of improvement, but they must be read carefully because the main supports are temporary in nature,” he said.

“The increase in revenue at the start of the year may provide some breathing room, but it is not enough to sustain spending needs throughout the year.”

Fiscal Pressure Intensifies
Indonesia’s fiscal position is also being strained by aggressive government spending early in the year. As of March 31, 2026, state expenditure had reached Rp 815 trillion, or 31.4% of the annual target.

Meanwhile, total state revenue stood at only Rp574.9 trillion, equivalent to 18.2% of the target.

The imbalance pushed the state budget deficit to Rp 240.1 trillion by March, equal to 0.93% of gross domestic product.

CORE warned that fiscal room to respond to geopolitical pressures and rising energy subsidy needs could narrow sharply if revenue weakens in the coming quarters.

“If revenue remains weak in the following quarters, pressure on the deficit and financing needs will increase further,” Akhmad said.