Indonesia Collects Less Tax as a Share of Its Economy Than Almost Any of Its Neighbors. Here's Why That Number Matters to You
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5 min read
Out of 38 economies in the OECD's latest Asia-Pacific tax report, only two collect less tax than Indonesia compared with the size of their economy. Those two are Timor-Leste and Bangladesh.
That number is the Indonesia tax ratio: how much the government collects in taxes, as a percentage of GDP. GDP (gross domestic product) is the total value of everything the country produces in a year.
It sounds like a dry number for economists. It is not. It helps decide how much the government has to borrow, and that touches the bond market and your portfolio. This post shows the numbers, the gap with neighbors, and the chain from low taxes to bond supply.
Take everything Indonesia produces in a year. Now ask: how much of that does the government collect as tax?
That share is the tax ratio. A ratio of 12% means that for every Rp100 the economy produces, the government collects about Rp12.
It is a better yardstick than the rupiah amount. A big economy should collect more rupiah. The ratio tells you whether the state collects more or less than its size would suggest.
The OECD published its Revenue Statistics in Asia and the Pacific 2026 report with 2024 data. Here is what it shows, as reported by MUC Consulting and Investortrust:
| Economy | Tax revenue, % of GDP (2024) |
|---|---|
| Philippines | 18.1% |
| Vietnam | 17.2% |
| Thailand | 17.1% |
| Singapore | 13.4% |
| Malaysia | 13.0% |
| Indonesia | 11.8% |
| Timor-Leste | 10.0% |
| Bangladesh | 6.7% |
The Asia-Pacific average was 19.7%. The average for OECD countries was 34.1%.
Indonesia sits about 5 percentage points below Thailand and Vietnam. A percentage point is one hundredth of GDP, so that gap is large.
You may see a smaller number in Indonesian news. That is not a mistake.
The Ministry of Finance reports its own "tax ratio." According to Bisnis.com's report on the ministry's data, it fell to 9.31% in 2025, from 10.08% in 2024.
The OECD number (11.8% for 2024) and the ministry number (10.08% for 2024) measure the same year but use different definitions. Do not mix them in one comparison. Use the OECD figure to compare countries. Use the ministry figure to track Indonesia over time.
The 2025 drop came from collections. Tax revenue in 2025 was Rp1.917,6 trillion, which was 87,6% of the Rp2.189,3 trillion target. That left a shortfall of about Rp271,7 trillion, according to Bisnis.com. Add customs and excise of Rp300,3 trillion and the total is Rp2.217,9 trillion.
The Finance Minister has said he wants the ratio back at 11% to 12% in 2026.
Here is the chain, step by step.
If tax collection is low, income is low. If spending stays the same, the gap is bigger. A bigger gap means more bonds to sell.
There is a legal limit. Indonesia's deficit is capped at 3% of GDP. For 2026, the budget set a deficit of Rp689,1 trillion, or 2,68% of GDP. The Finance Minister has since projected it could reach Rp734,3 trillion, or 2,85%, as reported by Republika. That is close to the cap.
More bond supply can push bond yields up. A yield is the return a bond pays each year. When the government has to offer more bonds, buyers may ask for a higher yield to take them. Higher yields can pull money away from stocks and change how the rupiah behaves.
We covered the mechanics in how the budget deficit shapes bond yields. For the stock of debt that builds up over time, see Indonesia's debt to GDP ratio explained. And for the other deficit, in trade and payments, read the twin deficits.
This does not mean yields will rise tomorrow. Many things move them: Bank Indonesia's policy rate, US yields, inflation, and foreign investors' appetite. The tax ratio is one slow-moving pressure among them. It is background, not a trading signal.
Three things tell you whether the ratio is improving:
You can follow the last one yourself. The NetWort macro page shows the Indonesia 10-year government bond yield next to the BI policy rate, rupiah and inflation. Open it and look at the Indonesia 10Y yield card. If the trend keeps rising while the deficit stays near the cap, you are seeing this story in real time.