For the first time in the last 12 years, Indonesia's revenue realization has exceeded the state budget target for the 2021 and 2022 fiscal years, which were recorded at 15,35 percent and 15,9 percent respectively higher than the state budget target (revised in 2022 by Presidential Decree 98/2022) (Ministry of Finance, 2022 & 2023). During the crisis impacted by the Covid-19 pandemic, the realization of state revenues needed to be addressed in a balanced manner considering that the realization of state spending was recorded as exceeding the target. Realization of state spending reached IDR 2.784,4 trillion or 1,32 percent above the 2021 spending target.
On the other hand, the PRAKARSA study (2022) states that Indonesia has experienced a loss of income for 10 years worth US$5,58 billion or the equivalent of 74 trillion rupiah (7,4 trillion rupiah per year). This loss is based on four tax sources, namely VAT, Royalty, Income Tax Article 22 (2,5%) and Income Tax (1,5%).
What kind of activities led to the loss of that much potential state revenue? Has the government not paid attention to this detrimental case? What recommendations does PRAKARSA offer to reduce these illicit financial flows?
Read the full PRAKARSA Policy Brief edition 37 “Potential Revenue Loss from Illicit Financial Flows in Fishery and Coal Sectors in Indonesia” below.