JAKARTA. Indonesia’s economic growth in this year will likely be overshadowed with several major risks. Even, the domestic economy in this year is potentially to slow down compared with the last year.
The newest Economic Quarter Report of the World Bank mentions that Indonesia needs to be cautious of domestic and external risks. From the domestic sides, tax revenues are predicted to miss the target.
Head of the World Bank Representative to Indonesia Rodrigo Chaves said, the tax revenues in 2016 were higher than in 2015. However, the regular tax revenues in 2016 would be lower than in 2015 if excluded the contributions of tax amnesty.
In fact, the government needs a huge amount of revenues to finance various programs. If the revenues decrease, the government has to cover the expenditure needs with debts. “The lack of revenues collection, as well as the limitation of fiscal deficit will significantly hamper the increase in public expenditure, at least in a medium term,” Chaves said, Tuesday (17/1).
Initially, the World Bank predicted that Indonesia’s economy may grow by 5.3%. However, if the target of revenues misses, the economic growth may be corrected. To date, the realization of tax revenues is always lower than the target set by the government.
Therefore, the government has to boost tax revenues. However, the government will likely be struggling to enhance the tax revenues, on the grounds that the tax amnesty program will expire in this year.
Chaves added, Indonesia’s fiscal credibility has improved, since the 2017 State Budget has set more realistic revenues target.
However, the World Bank assessed that the expenditure qualities, both at central and local levels, need to be improved. The betterment will help the government to improve public service provisions, as well as to achieve the development goal, while maintaining state revenues reform.
Expenditure qualities
The government can improve the expenditure quality by re-allocating the expenditures to priority sectors, such as infrastructure, health, and social aid sectors. Furthermore, the government also needs to allocate the expenditures to education and defense sectors.
Minister of Finance Sri Mulyani Indrawati said, the government will maximize the tax revenues target by utilizing new taxation basis data. Those data were resulted from the tax amnesty program. However, Sri admitted that there are several risks on the revenues sides. Therefore, she will evaluate the ability of tax authority in collecting revenues.
(Muhammad Farid/Translator)
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