Prabowo-Gibran’s New Fiscal Direction: Boosting Tax Revenues While Safeguarding Consumption
Key Takeaways
|
JAKARTA, Investortrust.id — Entering its first year, President Prabowo Subianto and Vice President Gibran Rakabuming Raka’s administration has made tax revenues the centerpiece of its economic agenda.
During a closed-door meeting of the Red White Cabinet at his Kertanegara residence on Thursday, Oct 16, 2025, President Prabowo instructed ministers to strengthen national revenue performance, particularly through the tax system led by newly appointed Finance Minister Purbaya Yudhi Sadewa.
The president directed all ministries to take concrete steps to bolster economic foundations, both through optimizing tax collection and refining policies on export proceeds.
Purbaya, who recently replaced Sri Mulyani as finance minister, now faces a dual challenge: maintaining tax collection targets amid slowing economic momentum while protecting household purchasing power under pressure.
In the October 14 APBN KiTa press briefing, Purbaya revealed that his ministry is studying the possibility of lowering the Value Added Tax (VAT) rate from 11% back to 10%, based on economic conditions and year-end revenue realization.
“This policy could give households more room to spend without jeopardizing our medium-term fiscal goals,” Purbaya said. “We are reviewing the available fiscal space to keep a balance between development needs and public purchasing power.”
The Finance Ministry has also launched a new public complaint channel, “Lapor Pak Purbaya,” via WhatsApp (0822-4040-6600), to receive feedback on tax and customs services. The initiative signals a shift toward greater transparency and public accountability as the government seeks to rebuild trust in tax authorities.
However, the broader tax reform agenda still faces technical hurdles. The Coretax digital system rollout has been slow, with only 2.6 million of 14 million individual taxpayers activating their accounts and just 1.2 million obtaining digital signature certificates as of mid-October. The lag underscores the need to accelerate structural reform within the Directorate General of Taxes (DJP) to ensure full implementation.
Meanwhile, the DJP reported a 10% rise in the number of high-income taxpayers paying the top 35% income tax rate compared to last year. Nonetheless, the government acknowledged that these contributions still fall short of reflecting the group’s total wealth, as many investment incomes remain outside the progressive tax scheme.
On the non-tax front, the government is also focusing on excise duties, particularly tobacco products, which remain a key state revenue source.
The Finance Ministry is reviewing potential adjustments to cigarette excise rates to avoid stoking consumer inflation, while exploring new excise opportunities on sugary drinks, ultra-processed foods, and plastic-based products to expand fiscal capacity.
Industry groups, however, have urged the government to implement such new taxes gradually, citing rising production costs and fragile consumer recovery.
Digital taxation has also been approached with caution. The Finance Ministry postponed the planned 0.5% income tax (PPh Article 22) on online merchants in e-commerce platforms until economic growth reaches 6%. The Indonesian E-Commerce Association (idEA) welcomed the delay, noting that it provides more room for digital MSMEs to adapt.
Liza Camelia Suryanata, Head of Research at Kiwoom Sekuritas Indonesia, said the Prabowo administration’s fiscal approach balances ambition with prudence.
“Prabowo seeks to boost revenues to fund large-scale development, while Purbaya is restructuring tax policy to be more inclusive, digital, and growth-oriented,” Liza said in her research note on Wednesday, Oct 22, 2025.
Overall, she added, the first year of the Prabowo-Gibran administration marks a period of fiscal consolidation — expanding the tax base, accelerating digital reform, and preserving consumer purchasing power.
The next challenge will be to speed up tax system transformation so that fiscal strength can support development goals without undermining economic growth.