Robert Pakpahan (left)

JAKARTA (TheInsiderStories) – Steadily rising of global oil price is expected to stimulate State Budget revenues next year, according to Minister of Finance Sri Mulyani Indrawati.

With a total revenue target of Rp1,894 trillion (US$132.5 billion), the government expects to achieve 10.1 per cent growth in oil and gas tax revenues next year.

“We expect next year’s revenues of oil & gas and commodities to be higher than the target that we (the government) have set in the State Budget. What’s more, we will increase the budget allocation for subsidy in order to maintain consumers’ purchasing power,” said Indrawati on Monday (18/12).

Oil prices rose at the opening on Tuesday amid an ongoing North Sea pipeline outage and signs that booming US crude output growth may be slowing, although the 2018 outlook points to ample supply despite production cuts led by OPEC.

U.S West Texas Intermediate crude futures were at $57.32 a barrel at 06.34 GMT, up 36 cents, or 0.6 per cent, from their last settlement. Brent crude futures, were at $63.59 a barrel, up 36 cents, or 0.6 per cent, from their last close.

The current price of Consumer Price Index (CPI) has surpassed government estimates. In the 2018 State Budget, the Indonesian government set its oil price assumption at  $48 per barrel. With that budget assumption, the risk is clearly towards a higher subsidy bill if there is resistance to altering retail prices ahead of key elections.

Tax Shortfall

The government’s State Budget has targeted Rp1,472.7 trillion ($108.93 billion) in tax revenue collections this year, up from Rp1,285 trillion in 2016. The Taxation Office announced that as of mid-Dec. 2017, the government has collected 82.6 percent of the tax revenue from this year’s total target.

Indonesia has struggled to lift its economic growth rate above 5 per cent, in spite of rate cuts by the central bank, Bank Indonesia, and deregulation moves by the government.

Any shortfall in tax collection could mean a widening of the fiscal deficit, which by law cannot exceed 3 per cent. The official target for the 2017 deficit is 2.7 per cent, while optimizing taxes following the tax amnesty implementation.

The challenge for the government is to achieve its tax targets, while avoiding any disruption of economic growth momentum. The government launched a tax amnesty program last year to broaden the taxpayer base, and nearly $360 billion of assets were declared before it ended in March this year.

“In overcoming the deficit, we have done our efforts, which are standard ones, both through extensification and intensification. We will improve quality,” vowed Robert Pakpahan, the new General Director of Taxes.

Center for Indonesia Taxation Analysis Executive Director Yustinus Prastowo estimated that the tax office would fail to achieve its target, falling about Rp 180 trillion short by the end of this year.

Written by Elisa Valenta, email: