ADB Approves US$500 Million Loan to Modernize Indonesia’s Tax System and Bolster Fiscal Sustainability
SDG 8: Decent Work and Economic Growth
SDG 16: Peace, Justice and Strong Institutions
Institutions: Ministry of Finance
The Asian Development Bank has approved a US$500 million policy-based loan to modernize Indonesia’s tax system under the first of three subprograms in its Domestic Resource Mobilization Programme. The initiative aims to enhance tax collection efficiency, improve equity, and strengthen fiscal resilience to finance public services and long-term development goals. A key feature is the rollout of Coretax, a new digital taxation platform designed to streamline tax administration, enhance data accuracy, and support compliance.
The programme also emphasizes international tax cooperation in line with the OECD/G20 BEPS framework, and introduces reforms to simplify value-added tax (VAT) processes - such as accelerating VAT refunds - and enhance tax dispute resolution mechanisms. ADB estimates that by 2030, these reforms could raise Indonesia’s tax-to-GDP ratio by 1.28 percentage points, creating fiscal space for growth and welfare investments while advancing the country toward upper-middle-income status.
Relevant question for policy stakeholders: How can India draw lessons from Indonesia’s digital tax modernization to strengthen its own tax-to-GDP ratio and deepen fiscal sustainability?
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https://www.adb.org/news/adb-strengthens-indonesias-tax-system-and-supports-fiscal-sustainability