Supporting the Indonesian government's tax reforms

The Indonesian government has embarked on a fiscal and budgetary reform program that aims to ensure sustainable financing of investments and redistribution policy for vulnerable populations. In order to support these ambitious reforms, the World Bank and AFD are co-financing a multi-phase program to improve the quality of government spending, fiscal policy and strengthen Indonesia's revenue administration.

In addition to these loans, AFD has mobilized two grants of 300 000 and 900 000 euros respectively to finance technical assistance programs. These programs aim to support the services of the Indonesian Ministry of Finance, the BKF (Tax Policy Agency) and DG Tax, and focus on several key themes: optimizing revenue collection, broadening the tax base, improving the reorganization of business processes and improving the quality of taxpayer services.

The main objective of the second TA programme is to support the evolution of the Ministry of Finance's BKF and DG Tax services towards a more efficient, innovative, cross-cutting administration focused on value for money, combating global warming and adapting to a complex international tax environment.

The technical assistance focuses on five themes:

• Strengthening the digital economy and taxation of online transactions.
• Expanding climate budget marking and environmental taxation.
• Optimising public resources and the tax base (tax expenditure, indirect taxation, grey economy/tax gap analysis and tax auditing processes).
• Improving the quality of services to taxpayers.
• Analysis and methodology of the BEPS (Base erosion and profit shifting) programme, dealing with tax base erosion and profit shifting to combat tax evasion and automatic exchange of information in collaboration with the OECD.

As the project is still in progress, the impacts of the technical assistance are not yet fully known. However, some observations can already be made: by choosing to focus on very specific topics (such as Climate Finaning and Multilateral Policy Center or Base erosion and profit shifting), AFD (via Expertise France) has aroused the interest of institutions and has been able to hold high-level workshops with the support of international, French and European experts.

This project will be evaluated as part of the general evaluation of the tax reform support programme.