ADB Approves $500M Loan to Modernize Indonesia’s Tax System and Boost Revenue

“This program marks a pivotal moment in supporting Indonesia’s fiscal sustainability agenda,” said ADB Country Director for Indonesia Jiro Tominaga.

The Asian Development Bank (ADB) has approved a $500 million policy-based loan to support the modernization of Indonesia’s tax system, a move aimed at improving tax collection efficiency, strengthening equity, and enhancing fiscal resilience to finance critical public services and long-term development goals.

This financing marks the first of three subprograms under ADB’s Domestic Resource Mobilization (DRM) Program for Indonesia. The program is designed to help the country strengthen tax policy frameworks, boost compliance, and reduce tax avoidance in order to create more sustainable revenue streams.

“This program marks a pivotal moment in supporting Indonesia’s fiscal sustainability agenda,” said ADB Country Director for Indonesia Jiro Tominaga. “By modernizing tax administration through digitalization and strengthening international tax cooperation, Indonesia will be better positioned to finance its development priorities while maintaining macroeconomic stability.”

Supporting Indonesia’s Development Vision

The DRM program aligns with the National Medium-Term Development Plan and is expected to significantly increase domestic revenue generation. According to ADB estimates, the first subprogram could raise Indonesia’s tax-to-GDP ratio by 1.28 percentage points by 2030, unlocking fiscal space for investments in infrastructure, health, education, and social protection—key to accelerating progress toward upper-middle-income status.

Three Pillars of Reform

The program focuses on three major reform areas:

1. Enhancing Tax Administration Efficiency

   • Operationalization of the Core Tax Administration System (Coretax), a modern digital taxation platform designed to streamline processes, improve taxpayer services, and enhance data accuracy.

   • Strengthening the capacity of the Directorate General of Taxes to detect and address non-compliance using advanced analytics and integrated data systems.

2. Improving International Tax Cooperation

   • Alignment with the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) to ensure that multinational corporations pay taxes where they conduct business and generate profits.

   • Enhanced ability to counter aggressive tax planning and cross-border tax evasion.

3. Advancing Tax Policies for Sustainable Development

   • Streamlined value-added tax (VAT) refund processes, reducing compliance costs for businesses—especially small and medium-sized enterprises (SMEs).

   • Faster, more efficient tax dispute resolution to improve transparency and trust in the tax system.

Driving Digital Transformation in Taxation

The launch of Coretax is a cornerstone of the program. The new platform will:

• Enable end-to-end digital tax services for individuals and businesses.

• Provide real-time data access for more accurate tax assessments.

• Reduce bureaucratic bottlenecks and human error.

• Increase transparency in tax collection, building public trust.

Combating International Tax Avoidance

Through strengthened legal and administrative measures, Indonesia will be better equipped to prevent profit shifting and ensure fair taxation of global corporations. This will help safeguard revenues that can be reinvested in the country’s development priorities.

ADB’s Commitment to Fiscal Resilience

The program reflects ADB’s broader strategy to help member countries mobilize domestic resources as a foundation for long-term, sustainable growth. By combining policy reforms with technology-driven modernization, ADB aims to make Indonesia’s tax system more inclusive, efficient, and growth-oriented.

Founded in 1966, ADB is owned by 69 member countries, including 50 from Asia and the Pacific. It works to promote inclusive, resilient, and sustainable growth through financial support, technical assistance, and partnerships that help governments address complex challenges—from infrastructure gaps to climate resilience.

With the DRM Program’s first subprogram now in motion, Indonesia is taking a critical step toward building a more robust, equitable, and future-ready fiscal system, capable of supporting its development ambitions in an increasingly interconnected global economy.