Indonesia Tax Revenue Lags Widodo Target as Retail Receipts Drop

Indonesia’s tax revenue collection fell short of the government’s target for the first four months of 2015, as weak oil prices and lower retail receipts signal an economic slowdown may have stretched into the second quarter.

The government received 310.1 trillion rupiah ($23.8 billion) from January to April 30, or 24 percent of its target for the full year, the finance ministry’s tax office said in a statement on its website on Wednesday. That was 1.3 percent lower than the same period last year.

President Joko Widodo is seeking to boost tax collection to fund better infrastructure, education and health care in Southeast Asia’s largest economy. The government expects state investment to start lifting growth from April, after the economy contracted 0.18 percent on a quarterly basis in the January-March period.

“I’m a bit pessimistic that the government will achieve its target,” said Josua Pardede, Jakarta-based economist at PT Bank Permata. “It seems the government has to borrow more by issuing more bonds.”

The government is prepared for a shortfall in revenue and a budget deficit in 2015 of as much as 2.3 percent of gross domestic product would be “still ok,” from a targeted 1.9 percent, Finance Minister Bambang Brodjonegoro said in an interview this month. The government is starting a campaign to improve collection by allowing citizens to avoid penalties if they pay five years of unpaid taxes, Brodjonegoro said.

Tax revenue from individuals and companies rose 10.6 percent from a year earlier in the four months through April, though oil and gas receipts fell 46.2 percent on weaker prices, the tax office statement showed. A 5.25 percent drop in value-added and luxury taxes may show weaker consumer spending, said David Sumual, Jakarta-based economist at PT Bank Central Asia. Household spending accounts for more than half the economy.