Indonesia’s tax revenue target of Rp2.908 trillion for 2027 presents a major challenge for the government. Amid the need to maintain fiscal sustainability, household purchasing power, and economic growth momentum, efforts to increase state revenue should be pursued without placing excessive additional pressure on individuals and businesses that have consistently fulfilled their tax obligations.
For this reason, the government’s policy direction toward strengthening oversight of potential revenue leakages deserves particular attention. Efforts to increase revenue should not rely solely on expanding tax collections or increasing the burden on the existing tax base. They should also focus on improving compliance, strengthening supervision, and enforcing the law against potential large-scale violations.
At the end of August 2026, Finance Minister Purbaya Yudhi Sadewa disclosed that the government was investigating 40 companies in the steel manufacturing and building materials sectors in connection with potential state revenue leakages estimated at between Rp4 trillion and Rp10 trillion.
The government also indicated potential revenue losses of up to around Rp1 trillion per year from one entity undergoing more extensive examination. The potential losses were linked, among other things, to Corporate Income Tax (PPh), Value-Added Tax (VAT/PPN), and raw-material import activities.
These preliminary findings must, of course, be followed up through transparent examination and law-enforcement procedures conducted in accordance with prevailing regulations. The presumption of innocence must continue to be upheld. Nevertheless, the scale of the potential revenue identified by the government demonstrates that there remains considerable room to improve compliance and close fiscal leakages.
This issue is important because weak tax revenue cannot always be explained solely by the level of taxpayer compliance. Structural problems also need to be addressed, ranging from the effectiveness of supervision and data integration to the quality of tax administration and the integrity of officials responsible for operating the system.
The effort to increase tax revenue can therefore also become an opportunity to strengthen fiscal fairness. Those who have consistently complied with their obligations should not continue to become the easiest targets whenever the state needs additional revenue.
Preventing Distortions
From the perspective of institutional economics, large-scale tax non-compliance has consequences that extend beyond the issue of state revenue.
Non-compliance can distort competition when companies that fully meet their obligations are forced to compete against businesses that gain cost advantages through practices that do not comply with regulations.
Compliant companies treat taxes as part of their normal cost structure. By contrast, businesses that manage to avoid some of these obligations may be able to offer lower prices not because of innovation, higher productivity, or efficiency, but because they gain an advantage from non-compliance.
Over the long term, such a situation can create the wrong incentives. Businesses that comply with the rules face relatively higher costs, while those that fail to meet their obligations receive an economic advantage.
If this situation is allowed to continue, the system indirectly rewards those who do not fully meet their responsibilities.
Closing revenue leakages in sectors with significant economic value is therefore not merely a fiscal agenda. It is also part of creating a more level playing field for businesses.
When revenue can be increased by improving compliance and closing leakages, the government gains greater fiscal space without having to rush to impose additional burdens on the public.
At the same time, companies that have consistently complied with tax regulations gain greater assurance that their compliance will not place them at a competitive disadvantage.
Strengthening tax enforcement against large corporations may raise concerns about its impact on investment. Investigations that are disproportionate, non-transparent, or create uncertainty can certainly increase the cost of doing business.
However, the issue is not whether supervision should exist, but rather the quality of that supervision.
Long-term investment requires legal certainty, transparency, and equal treatment. Investors with a long-term orientation have a direct interest in a system that ensures all businesses operate under the same rules.
Strengthening tax law enforcement therefore does not need to be seen as conflicting with efforts to attract investment. The two objectives can progress together as long as supervision is professional, data-driven, proportionate, and capable of providing legal certainty.
Conversely, allowing informal economic activity or business activities outside the formal system to continue unchecked can create even greater uncertainty. The state loses revenue, while compliant businesses are forced to compete on an uneven playing field.
Fiscal Credibility
The next challenge is ensuring that improvements in tax administration do not stop at digitalization.
Technology can enhance the government’s ability to match data, identify unusual transactions, and reduce interactions that may create opportunities for misconduct. However, technology cannot substitute for integrity.
Even the most sophisticated digital system ultimately depends on the quality of governance and the people operating it. Tax reform must therefore proceed along two tracks simultaneously: strengthening technology and data while also building bureaucratic integrity.
If officials are found to have assisted or tolerated violations, the matter must be handled firmly and transparently. This is important not only to protect state revenue, but also to preserve the credibility of tax institutions in the eyes of the public.
Tax compliance is ultimately closely linked to trust. People are more willing to meet their obligations when they believe that the system treats all taxpayers equally and that state revenue is managed responsibly.
Indonesia’s Rp2.908 trillion tax revenue target for 2027 should therefore not be viewed merely as a question of how to collect more money.
The target is also a test of the government’s ability to build a revenue system that is fairer, more effective, and more credible.
The government has a choice between strengthening revenue by extracting more from an already compliant tax base or working harder to recover revenue that has previously remained outside the system.
The second option undoubtedly requires stronger supervision, better data integration, and more effective law enforcement. However, it also carries a greater degree of fairness.
The investigation into potential revenue leakages involving dozens of companies in the steel and building-materials sectors can serve as a starting point. However, such measures should not be limited to temporary enforcement actions. Risk- and data-based supervision needs to be institutionalized as a permanent component of tax administration.
In this way, the success of tax reform would not be reflected solely in the amount of revenue collected. It would also be measured by how fairly the burden is distributed, how little room remains for non-compliance, and how much trust the public places in fiscal institutions.
If revenue leakages can be reduced, officials involved in misconduct are held accountable, and compliant taxpayers receive fair treatment, higher state revenue does not always have to mean a greater burden on society.
Through such measures, the substance of tax reform can be realized. The state would not merely become more effective at collecting taxes; it would also become more capable of ensuring that every party fulfills its obligations proportionately.
This form of fiscal fairness is what Indonesia needs to strengthen the foundations of its economy heading into 2027.
