Indonesia Targets Shadow Economy to Lift USD 145 Billion in 2026 Tax Revenue

Indonesia is stepping up efforts to widen its tax base and tap into the shadow economy as it seeks to raise Rp 2,357.7 trillion ($145.6 billion) in tax revenues by 2026. The target marks a 13.5% increase — or IDR 280.8 trillion — from projected 2025 collections of IDR 2,076.9 trillion.

The shadow economy — also known as the underground or informal economy — refers to unreported or underreported business activities that operate outside official oversight. These include cash-based transactions, unregistered businesses, and illicit trade. While difficult to measure, the shadow economy often accounts for a substantial portion of GDP in developing countries, depriving governments of billions in tax revenue while leaving workers and firms outside regulatory protection.

According to the government’s 2026 budget plan and financial report, authorities will focus surveillance on high-risk sectors such as retail trade, food and beverages, gold trading, and fisheries. Active “canvassing” investigations will be carried out to identify and register previously untaxed entities.

The government has also appointed foreign entities as value-added tax (VAT) collectors for cross-border e-commerce transactions, strengthening supervision of the fast-growing digital economy. In addition, tax authorities are compiling fiscal data on unregistered businesses operating on digital platforms to improve oversight and compliance.

Warnings Over Ambitious Targets

Earlier this week, the Centre for Strategic and International Studies (CSIS) cautioned that the government’s ambitious targets could push it toward tougher tax collection measures and rapid expansion of the taxpayer base.

“The figures suggest the government will intensify its tax collection drive next year. In the past five years, taxes have risen from 77% to 86% of state revenue,” said Deni Friawan, senior researcher at CSIS.

Indonesia’s tax base remains shallow. Out of 145 million working-age people, only around 17 million consistently file or pay taxes. Untapped potential in the informal sector and underground economy has left a wide gap in collections, while reliance on global commodity cycles continues to expose state finances to external shocks.

Finance Minister Sri Mulyani Indrawati dismissed concerns that the government may resort to heavy-handed collection tactics. Instead, she prioritized ongoing reforms, tighter compliance oversight, and digital tools as the backbone of revenue growth.

Key measures include strengthening the “core tax” administration system, expanding data sharing across government agencies, taxing digital transactions, and launching joint audit and enforcement initiatives.

“Data integration and the new core tax system will be pushed harder. We still have room to raise revenue without inventing new taxes,” Sri Mulyani said.

Source: Jakarta Globe

Bank Indonesia Launches QRIS Operation Trials in China

Bank Indonesia (BI) and the People’s Bank of China have launched a series of trials for cross-border QR code payments, linking QR Code Indonesia Standard (QRIS) with China’s payment system for seamless interoperability.

"The continuous development and innovation of QRIS features aim to expand its acceptance and support digital economic and financial inclusiveness. One of the innovations is the cross-border QRIS," Bank Indonesia Governor Perry Warjiyo stated here on Sunday.

He explained that payment interconnection between Indonesia and China will facilitate cross-border trade and financial transactions, especially for micro, small, and medium enterprises (MSMEs), and encourage tourism between the two countries.

The central bank governor expressed hope that the trial will be successful and eventually lead to the official roll-out of the cross-border QRIS to Chinese markets.

According to Warjiyo, the trial in China will involve the Indonesian Payment System Association (ASPI), China's UnionPay International (UPI), and payment system operators from Indonesia and China.

Warjiyo also stated that the initiative reflected the shared commitment between Bank Indonesia and the national payment system industry to expand Indonesian digital payment to the global stage.

Earlier, BI Deputy Governor Filianingsih Hendarta reported that cooperation for the planned expansion of QRIS coverage to China is progressing positively. Indonesia's ASPI and China's UnionPay International have agreed to finalize business, technical, and operational arrangements.

Four Indonesian switching service providers—PT Rintis Sejahtera (Rintis), PT Alto Network (Alto), PT Artajasa Pembayaran Elektronis (Artajasa), and PT Jalin Pembayaran Nusantara (Jalin)—have also signed an agreement with UnionPay International to proceed with system development and sandbox testing.

Since its launch in 2019, QRIS has achieved cross-border expansion and is currently available in Malaysia, Thailand, and Singapore.

In addition to trials in China, Bank Indonesia also officially launched the use of cross-border QRIS in Japan on Sunday, coinciding with the celebration of Indonesia's 80th Independence Day.

Source: Antara News

Indonesia-Germany Strengthen Cooperation in Key Priority Sectors

Indonesian Foreign Affairs Minister Sugiono welcomed German Foreign Minister Johann Wadephul in Jakarta on Tuesday, August 20, 2025, marking Wadephul’s first official visit to Asia since taking office in May 2025. His decision to include Indonesia as one of his first destinations underscores the strong and growing partnership between the two countries.

During the meeting, both ministers discussed ways to strengthen bilateral cooperation in key priority areas, ranging from trade and investment to clean energy, labor mobility, and food security. 

Quoting kemlu.go.id, Minister Sugiono expressed appreciation for the invitation extended by German President Frank-Walter Steinmeier to Indonesian President Prabowo Subianto for a state visit to Berlin in the second half of 2025. 

Minister Sugiono also shared insights into President Prabowo’s flagship programs, particularly those focused on eradicating poverty and hunger. In support of these goals, both countries reaffirmed their commitment to accelerating the implementation of the Indonesia–EU Comprehensive Economic Partnership Agreement (CEPA) to further expand trade and investment.

Indonesia invited Germany to collaborate through the Danantara initiative, with investment opportunities in priority sectors such as renewable energy, artificial intelligence, infrastructure, and food resilience.

On labor cooperation, both ministers welcomed the ongoing deployment of Indonesian healthcare workers to Germany and encouraged broader collaboration, including in the hospitality sector. Germany also offered support through language training programs for prospective Indonesian workers.

In the energy sector, Indonesia acknowledged Germany’s leadership role as a co-lead in the Just Energy Transition Partnership (JETP). The two countries agreed to enhance cooperation in the clean energy transition, including promoting private sector involvement in green investments.

Food security was another key focus. Indonesia invited Germany to support its Free Nutritious Meals Program through sustainable agriculture, livestock partnerships, and solar-powered cold storage technologies.

Both leaders also emphasized the importance of enhancing people-to-people ties by facilitating visa access for students, tourists, diplomats, and service passport holders.

On regional and global issues, including the situation in Palestine, Indonesia called for greater global unity to end the humanitarian crisis and welcomed recent moves by major countries to formally recognize Palestinian statehood.

Minister Johan Wadephul noted Indonesia’s growing global role, describing it as the world’s third-largest democracy with rapid development and increasing international influence. He emphasized that Indonesia is a key partner for both Germany and the European Union.

Germany and Indonesia established diplomatic relations on June 25, 1952. The meeting served as a significant step in preparing for President Prabowo’s upcoming visit to Germany and in deepening the strategic partnership across various sectors.

Source: Radio Republik Indonesia