Indonesia’s economy is currently grappling with significant difficulties, which are deeply affecting its citizens. The increasing costs of living, inflation, and recent policy changes are putting immense pressure on the public. Although fiscal reforms are essential for restoring economic stability, these measures must be thoughtfully planned and take into account their effects on the daily lives of ordinary people. This piece examines the existing economic policies, focusing on taxation, and discusses how enhancing partnerships with the private sector could alleviate some of the pressure on the public.

Prabowo’s Economic Strategy at a Glance
Prabowo's role in shaping fiscal policy, particularly in the area of taxation, has been instrumental in tackling the national budget deficit. A central aspect of his strategy is boosting state revenue through various taxes, including the widely debated Value Added Tax (VAT). This push for higher taxes has sparked considerable discussion, particularly regarding its effects on the public.

Finance Minister Sri Mulyani has emphasized the need for increased tax revenue to meet the country’s financial obligations. The raised VAT and other taxes, affecting both luxury items and everyday goods, are designed to support the national budget. However, these tax hikes have had a significant impact on households, exacerbating the financial strain in an already challenging economic environment marked by inflation and uncertainty. The increase in VAT and other taxes, affecting a broad spectrum of goods, has raised concerns about the additional burden on everyday citizens, who are already facing the challenge of escalating living expenses.

The Growing Strain on Ordinary Citizens
Although the government’s decision to raise taxes might appear to be a reasonable approach to stabilize the economy, its impact on the public is more intricate. With rising inflation pushing up the cost of essential goods, people’s purchasing power has been notably diminished. At the beginning of 2025, the weakening of Indonesia’s purchasing power became a major concern, coinciding with two consecutive months of deflation, according to data from the Central Statistics Agency (BPS). Many economists believe that this drop in consumption is largely driven by precautionary saving, as people are putting aside more money due to economic uncertainty, which has been worsened by a surge in layoffs. The data shows a clear decline in spending on non-essential items, while expenditures on basic necessities have increased. This shift in consumer spending patterns may slow down economic growth, as the reduction in household consumption leads to a decrease in aggregate demand.

Compounding the economic pressure are recent increases in property taxes (PBB) imposed by local governments. After new regional leaders took office, many areas experienced substantial hikes in property taxes. This has led to protests, with citizens feeling that the higher taxes are unfairly impacting them, particularly since their wages have not risen at the same pace.

Another factor heightening public frustration is the revision of housing allowances for Members of Parliament. These changes have ignited protests, as many believe government officials continue to enjoy benefits while ordinary citizens bear the burden of rising costs. The widening gap between the privileges of officials and the hardships faced by the public has intensified discontent and exacerbated feelings of inequality.

Urging Cooperation Between the Executive and Legislature
The widening gap between Indonesia’s executive and legislative branches is hard to ignore. On one hand, President Prabowo has pushed forward fiscal reforms with a strong emphasis on boosting state revenue. Yet, parliament seems to lag in forming a united front to address how these measures affect ordinary Indonesians. The disconnect creates the impression that policies are crafted in isolation, without the kind of meaningful dialogue that could make them more grounded in public realities.

What Indonesia needs now is not merely another round of tax hikes, but a genuine rethink of how fiscal policies can serve the people. It is undeniable that the government must meet its financial obligations, but it should not come at the expense of households already stretched thin by rising costs. Policies that ease, rather than compound, this pressure are what citizens are calling for.

This is precisely where collaboration between the executive and legislature becomes critical. A stronger partnership could pave the way for reforms that are not only fiscally sound but also socially fair. By ensuring that tax policies take into account social welfare and shield vulnerable groups from disproportionate burdens, the government can restore trust and build a system that reflects both responsibility and fairness. At the heart of any reform should be the principle that stability cannot be achieved by sidelining the very people it is meant to protect.

Driving Growth Through Public-Private Synergy

One promising strategy for easing fiscal strain without resorting to endless tax hikes is for the government to deepen collaboration with the private sector. Tourism alone holds enormous untapped potential to boost state revenues and fuel growth, but the real opportunity lies in mobilizing private capital to finance essential infrastructure and social development programs. This way, the costs of nation-building do not fall disproportionately on ordinary households.

The notion of public-private partnerships (PPPs) is hardly revolutionary; countless countries have shown that when managed well, they can expand economic capacity and distribute responsibility more evenly. Indonesia, in fact, has its own example worth learning from. During his time as Governor of Jakarta, Basuki Tjahaja Purnama (Ahok) implemented a system that allowed corporations to take direct charge of their Corporate Social Responsibility (CSR) initiatives. Instead of funnelling CSR funds through layers of bureaucracy, firms were entrusted to carry out concrete project such as renovating public parks and later hand the completed work over to the provincial government. The results were visible, immediate, and efficient, showing how private resources could be deployed in ways that directly served public needs.

This approach should not remain a local experiment; it has real potential as a national model. Rather than repeatedly leaning on VAT or property tax hikes—which drain household income while providing little direct return, the state could design frameworks that link CSR programs more closely to national priorities. Businesses are already active in fields like education, healthcare, and environmental protection, but these contributions could be better synchronized with government objectives to produce broader, long-term impact.

Looking forward, policies that encourage private sector investment in renewable energy, technology, and green infrastructure would not only strengthen fiscal resilience but also push Indonesia toward a more sustainable and innovative future. What is required is a shift in mindset: cooperation instead of contention between state and private. Ahok’s policy in Jakarta should therefore be remembered not as a one-off success, but as a template showing how Indonesia can reduce its overdependence on taxes, relieve pressure on citizens, and still deliver tangible progress.

Charting a Fairer Path: Taxes and Partnerships in Harmony
Indonesia’s ongoing tax reforms, while aimed at safeguarding fiscal stability, are increasingly weighing on the shoulders of citizens. The rise in VAT and property levies has been especially painful in a climate where wages remain stagnant and living costs continue to climb. This widening gap has fuelled public frustration, made worse by the perception that government officials still enjoy privileges far removed from the daily hardships citizens face.

What Indonesia needs is a more measured path forward. Taxation should not be designed merely as a tool to plug state finances but as a system that protects citizens from excessive strain while still ensuring the state’s fiscal responsibilities are met. One way to achieve this is by deepening collaboration with the private sector. Directing investment into vital areas such as tourism, renewable energy, and infrastructure would not only spur growth but also distribute the responsibility of development more fairly.

By rethinking the balance between state revenue policies and private sector engagement, Indonesia has the opportunity to build an economy that is both resilient and just, where progress is shared rather than shouldered disproportionately by its people.

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Nona Evita is a former journalist and a graduate of School of Oriental and African Studies (SOAS) from the University of London. She is a lecturer in communication science at the Multimedia Nusantara University.

The views expressed in the article are those of the author.