World Bank Tells Indonesia To Improve Tax Collection

by Mary Swire, Tax-News.com, Hong Kong

24 September 2001

The World Bank has urged the Indonesian government to improve its tax collection efforts to fund the country's struggling public services and enhance its debt repayment ability. The 2001 tax revenue collection has to meet a target of Rp156 trillion (US$16.5 billion) but this would still equate to a deficit of 3.7% of GDP.

The World Bank, which loaned around $440 million to Indonesia last month, is the country's biggest financier but all loans add pressure on future budgets. Senior Economist at the World Bank, Bert Hoffman, has recommended that the government reduce its tax exemptions, streamline tax administration and promote more awareness of the obligations that taxpayers must meet.

Tax evasion has been rife in Indonesia: last year at least half of the country's government officials did not pay tax and of the 20 million or so people that should be paying tax only 1.3 million were registered of whom less than half were dutiful tax payers.

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