OECD Report Shows Indonesia Has Asia-Pacific's Third-Lowest Tax Ratio, Raising Questions Over Fiscal Capacity

JAKARTA, Investortrust.id — Indonesia posted the third-lowest tax-to-GDP ratio among 38 Asia-Pacific economies in 2024, underscoring the country's ongoing challenge to raise fiscal revenue as it pursues ambitious infrastructure, industrialization, and social spending programs, according to a new report from the Organisation for Economic Co-operation and Development (OECD).

The OECD's latest Revenue Statistics in Asia and the Pacific 2026: Taxing Informal and Hard-to-Tax Sectors showed Indonesia's tax revenue amounted to 11.8% of gross domestic product (GDP), placing it above only Timor-Leste and Bangladesh.

A low tax ratio limits a government's ability to finance public investment without increasing borrowing.

For Indonesia, Southeast Asia's largest economy, improving tax collection has become increasingly important as President Prabowo Subianto's administration expands spending on infrastructure, industrial downstream development, food security, healthcare, and defense while seeking to maintain fiscal discipline.

Indonesia's tax ratio remains significantly below the Asia-Pacific average of 19.7%, the OECD average of 34.1%, and the Latin America and Caribbean average of 21.7%.

The region's average, however, remains above Africa's 16.1% tax ratio recorded in 2023.

Among the countries surveyed, only Timor-Leste, with a tax ratio of 10.0%, and Bangladesh, at 6.7%, ranked below Indonesia.

The report also highlighted differences between tax ratios and tax revenue per capita.

Indonesia collected approximately $1,969 in tax revenue per capita in 2024, nearly matching Samoa's $2,043 despite Samoa recording a substantially higher tax-to-GDP ratio because of differences in economic output.

Similarly, Bhutan and Malaysia posted comparable tax ratios of 13.2% and 13.0%, respectively. However, Malaysia generated more than twice as much tax revenue per person due to its significantly higher GDP per capita.

Across the Asia-Pacific region, average tax revenue increased for the fourth consecutive year in 2024.

The OECD attributed the improvement to resilient economic growth, strong export performance, rising investment in technology industries, and continued recovery in tourism across several Pacific island economies.

Tax-to-GDP ratios increased in 16 economies during 2024.

The largest annual gains were recorded in the Cook Islands, Mongolia, the Marshall Islands, Fiji, and Sri Lanka, each posting increases of at least two percentage points.

The OECD said the improvements were driven by stronger tourism, expanding business activity, and national tax reforms.

Looking over the past decade, tax ratios increased in 21 of the 36 Asia-Pacific economies between 2014 and 2024.

The strongest gains came from Mongolia, followed by the Cook Islands, Kiribati, the Maldives, Nauru, and the Marshall Islands.

In Mongolia, the OECD credited the adoption of a progressive personal income tax system alongside strong mining-sector performance, which boosted corporate tax revenue.

Meanwhile, countries posting the sharpest declines over the decade included Timor-Leste, Kazakhstan, Malaysia, Papua New Guinea, and Hong Kong.

The OECD said weaker global commodity prices contributed to falling tax revenues in both Kazakhstan and Timor-Leste, while declining oil and natural gas production further reduced government income in Timor-Leste.