World Bank: 48% of Small Businesses Avoid QRIS to Evade Tax

A recent World Bank report titled ‘Indonesia: Unlocking Business Tax Potential for Growth’ has found that 48% of micro-businesses in Indonesia intentionally avoid using the Quick Response Code Indonesian Standard (QRIS) to evade taxes. The behaviour is primarily motivated by a lack of trust in the tax system and concerns over corruption, rather than a lack of access to technology. These small enterprises prefer cash transactions to avoid leaving a digital trail that could be audited by tax authorities.

The report highlights a significant correlation between tax avoidance and low engagement with the formal financial system. Businesses that evade taxes are also less likely to access formal loans or credit facilities, which in turn stifles their growth potential. Conversely, exporters who require trade financing demonstrate higher compliance and deeper integration with the banking sector.

This widespread avoidance has substantial implications for state revenue, particularly as the national budget faces increasing pressure. The narrow tax base limits the government’s fiscal space for productive spending. Furthermore, the preference for cash transactions deepens economic informality, creating a vicious cycle where micro, small, and medium enterprises (MSMEs) remain cut off from the formal financial services they need to scale up.

The findings serve as a critical alert for banks and payment service providers. The aggressive push for QRIS adoption has not been matched by efforts to build trust in the tax system. Moving forward, the government’s response will be crucial. Policy signals to watch include potential tax incentives for QRIS merchants and transparency campaigns on tax usage, which could determine whether compliance improves or informality deepens further.