Indonesia's Tax Structure Assessed as Unbalanced, Here's Why
Indonesia’s tax revenue structure is assessed as not yet ideal due to disparities between the contributions of major economic sectors and the tax revenues generated. The weakening contribution of the manufacturing sector to tax revenues also indicates stagnation in this sector over recent years.
In 2025, the manufacturing sector contributed 24.6%, or approximately Rp471.17 trillion, of total tax revenues of Rp1.917.6 trillion. This contribution has tended to decline compared with 2018, which reached 30%.
The manufacturing sector’s contribution to gross domestic product remains in the range of 18%-19% according to data from the Central Statistics Agency (BPS). Meanwhile, the agricultural sector recorded significant growth of 5.33% in 2025, the highest in the past 10 years.
However, the agricultural sector’s high growth is not proportional to its contribution to tax revenues. Over the past five years, the agricultural sector’s average contribution to GDP is 12.78%, whilst its contribution to tax revenues is only 1.38%, or approximately Rp26.57 trillion in 2025.
The construction and real estate sectors also show lower contributions to tax revenues compared with their GDP contributions. The application of final income tax is suspected to be the cause of this imbalance.
The Executive Director of the Institute for Development of Economics and Finance (Indef), Esther Sri Astuti, acknowledges stagnation in Indonesia’s economic structure, where the agricultural sector remains the principal contributor. The manufacturing industry is assessed as experiencing degradation.
Esther explained that high growth in the manufacturing sector does not reflect growth in labour-intensive sectors. The textile sector, for instance, faces challenges such as expensive raw materials and the onslaught of imported products.
“In the domestic market as well, we come under attack from a collection of products like those from China, which are far cheaper in price and even better in quality. That is indeed China’s strategy,” Esther told Bisnis on Monday, 16 February 2026.
In addition to import problems, the textile sector faces fundamental issues. Esther believes the government needs to attract more investors to create an ecosystem from upstream to downstream. According to her, the quality of human resources needs to be improved so that Indonesia’s textile industry can compete with other countries. “In terms of model, fashion, style, we have very few textile schools,” she explained.
Scepticism over Economic Recovery
The Center for Indonesia Taxation Analysis (CITA) doubts Finance Minister Purbaya Yudhi Sadewa’s claims about economic recovery reflected in tax revenue growth of 30.7% year-on-year in January 2026.
CITA’s Head of Research, Fajry Akbar, believes that the high growth is more attributable to a low base effect resulting from Coretax problems in the previous year.
“I am also puzzled, since last year the government has been so reluctant to mention the Coretax problem as one of the causes of the plunge in revenues in January 2025,” he told Bisnis on Tuesday, 25 February 2026.
Fajry compared tax revenue performance over the past three years and found that tax revenues in January 2026 were lower than in 2023 and 2024.
He also highlighted the performance of gross tax revenues in December 2024 and January-February 2025, which actually increased 1.34% year-on-year, even though gross tax revenues contracted -13% year-on-year in January 2025.
“It makes very little sense given the Coretax chaos in January 2025. I believe net tax revenues in January 2025, which contracted -41%, more accurately reflect the actual conditions,” he said.