Despite Tax Shortfall, Indonesia’s 2017 Customs & Excise Target Met

Despite Tax Shortfall, Indonesia's 2017 Customs & Excise Target Met (Source: The Jakarta Post)

 

Although tax revenue realization will not achieve the target that was set by the Indonesian government in the (revised) 2017 state budget, the government’s customs and excise revenue target has been achieved this year. Data from the Directorate General of Customs and Excise show that IDR 189.36 trillion (approx. USD $14 billion) was collected in customs and excise revenue up to 28 December 2017, equivalent to 100.11 percent of the full-year target.

A closer look at the data show that import taxes in the 1 January 2017 – 28 December 2017 period reached IDR 34.58 trillion (approx. USD $2.6 billion), or 103.9 percent of the government’s full-year target. Excise taxes reached IDR 150.81 trillion (approx. USD $11.2 billion), or 98.4 percent of the target, while export taxes reached IDR 3.97 trillion (approx. USD $294 million), or 146.9 percent of the target.

What caused this good performance? Firstly, both the domestic and global economy strengthening in 2017, hence import and export activities rose. This encourages the accumulation of more import and export taxes.

Regarding export taxes, the relaxation of strict export rules in the mining sector contributed sharply to rising export tax revenue, specifically in the minerals and coal mining sector. For example, Freeport Indonesia, the local unit of mining giant Freeport McMoran Inc, was granted a permit to export 1.11 million wet metric tons of copper concentrate until February 2018. Earlier, these exports had ceased due to the strict 2009 Mining Law (that includes a ban on exports of unprocessed minerals).

Secondly, Indonesia’s cigarette manufacturers were quicker to fulfill their excise obligations this year. This has a big impact on excise revenue because these cigarette companies are the biggest contributors to excise revenue (followed by alcoholic beverages and ethyl alcohol).

In 2016 a total of IDR 178.7 trillion was collected in customs and excise revenue, equal to 97.2 percent of the government’s target last year.

Customs and Excise Duties:

in IDR trillion Target Realization
(per 28/12)
Import Tax  33.28    34.58
Export Tax   2.70     3.94
Excise Tax 153.16   150.81
Total 189.14   189.36

Source: Business Indonesia

Tax Revenue Shortfall in 2017

Meanwhile, up to 29 December 2017, Indonesia only managed to collect IDR 1,132.1 trillion (approx. USD $84 billion), or 88.2 percent of the full-year target, hence it is basically impossible to achieve the target (set at IDR 1,283.6 trillion in the Revised 2017 state budget). On Tuesday 2 January 2018 the Finance Ministry is scheduled to release the final figures.

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