Just Beginning of the Year, Tax Payments Drop 30 Percent and State Budget Experiences Deficit

JAKARTA, KOMPAS – State revenues as of February 2025 have fallen quite significantly. For the first time since 2021, the APBN has experienced a deficit since the beginning of the year. The government believes that this condition was caused by the correction of commodity prices and a number of new policies, but did not mention the constraints of the Coretax system at all.

The Ministry of Finance (Kemenkeu) noted that state revenue as of February 2025 was IDR 316.9 trillion or 10.5 percent of the 2025 State Budget (APBN) target was realized.

Compared to the same period last year, state revenues fell 20.85 percent annually. In comparison, in February 2024, state revenues were IDR 400.4 trillion or 14.29 percent of the 2024 State Budget target.

The decline in state revenues early this year was mainly due to lower tax revenues, particularly tax deposits.

Tax revenue in February 2025 reached IDR 187.8 trillion or 8.6 percent of the 2025 State Budget target was realized. This achievement dropped 30.19 percent compared to last year's tax revenue, which was IDR 269.02 trillion or 13.53 percent of the 2024 State Budget target.

On the other hand, state spending in February 2025 was recorded at IDR 348.1 trillion or 9.6 percent of the 2025 State Budget target was realized. This achievement is also lower than the same period last year, which was IDR 374.32 trillion or 11.26 percent of the 2024 State Budget target was realized.

With the realization of revenue and spending, the State Budget as of February 2025 has recorded a deficit of IDR 31.2 trillion or 0.13 percent of gross domestic product (GDP). As a comparison, in the same period last year, the State Budget still had a surplus of IDR 26.04 trillion or 0.11 percent of GDP.

This also marks the first deficit in the February APBN since 2021. Reflecting on previous years, the 2024 APBN only experienced a deficit in May 2024, which was IDR 21.76 trillion or 0.10 percent of GDP. In fact, in 2023, the deficit only occurred in October 2023, which was IDR 700 billion or 0.003 percent of GDP.

State revenues have indeed decreased, but the pattern is the same.

Finance Minister Sri Mulyani Indrawati explained that the decline in state revenue at the beginning of the year occurred as per the January-February pattern from year to year which tends to decline.

This was caused by, among other things, a slowdown due to commodity price corrections and several newly introduced policies, resulting in a shift in state revenues.

Some of the new policies include an increase in the Value Added Tax (VAT) rate which will not be generally applicable in 2025, a decrease in commodity prices, and a new mechanism for the average effective rate (TER) which affects Income Tax (PPh) Article 21 revenues.

"So, state revenues have indeed decreased, but the pattern is the same," said Sri Mulyani in a press conference on the State Budget Performance and Facts (APBN KiTa) March 2024 Edition, in Jakarta, Thursday (13/3/2025).

The Ministry of Finance did not mention at all the obstacles to the implementation of the Coretax tax administration system which has only been in effect since January 1, 2025. In fact, the problematic Coretax system has made it difficult for taxpayers to fulfill their tax obligations at the beginning of this year.

The government will remain vigilant about the decline in revenue without causing turmoil or alarm. Sri Mulyani ensured that the 2025 State Budget deficit will be maintained in accordance with Law Number 62 of 2024 concerning the 2025 State Budget, which is 2.53 percent of GDP.

Mid this year, the Ministry of Finance will report the performance of the 2025 State Budget per Semester I-2025 along with the estimated end-of-year deficit. "The end-of-year deficit will still be guided by the State Budget. Later there will be movements and we will convey every movement," he said.

Deputy Minister of Finance Anggito Abimanyu added that the correction in the prices of major global commodities, such as coal, crude oil, and nickel, has caused tax revenues in January-February 2025 to slow down compared to last year. In addition, there are also factors such as the implementation of TER PPh 21 in January 2024 and the relaxation of domestic VAT payments.

Anggito said that tax revenues in the last four years have a similar pattern, namely increasing in December and decreasing in January-February. The increase in revenues in December was influenced by the effects of Christmas and New Year, as well as the end-of-year budget cycle.

In anticipation of the decline in revenue at the beginning of this year, the Ministry of Finance will also take a number of steps to reduce the tax gap by seeking other sources that can still be optimized. One of them is by transforming the joint program.

"This is done between the first echelon of the Ministry of Finance. There are more than 2,000 taxpayers who have been identified, then they will be analyzed, supervised, examined, billed, and intelligent," he said.

The Ministry of Finance will also implement digital transaction taxation, both domestically and abroad, including monitoring (trace) and tracking (track) to reduce smuggling and excise and counterfeit cigarettes. Non-Tax State Revenue (PNBP) from Natural Resources, such as coal, nickel, tin, bauxite and palm oil, will also be optimized.

Regarding the APBN which has been in deficit since February, Sri Mulyani considered that there is no need to worry. Because, the deficit is still far below the budget deficit target set in the 2025 APBN, which is IDR 616.2 trillion or 2.53 percent of GDP.

"So, this deficit is actually still within the APBN design target," said Sri Mulyani.

However, Economist and Public Policy Expert at the National Development University (UPN) Veteran Jakarta Achmad Nur Hidayat estimates that the trend of weakening state revenues and spending that is difficult to suppress could widen the APBN deficit throughout 2025.

According to him, the deficit even has the potential to swell to IDR 800 trillion or around 3 percent of GDP.

"If we look at the early year trend, the Rp800 trillion scenario is a realistic baseline. A deficit of this size will have serious consequences, both on the debt ratio, debt interest burden, and the risk of dependence on expensive short-term debt financing," said Achmad.

The emergence of a fiscal deficit since the beginning of the year means that 2025 can no longer be viewed as an ordinary fiscal year.

Previously, as reported by Bloomberg, Goldman Sachs Group Inc, a world-renowned multinational investment institution, has lowered Indonesia's investment asset rating due to increasing fiscal risks.

Goldman Sachs estimates that the 2025 state budget deficit will reach 2.9 percent of GDP, higher than the previous estimate of 2.5 percent. The report was released on March 7, 2025.

Achmad added that government bond yields were starting to climb, indicating that financial markets were starting to lose confidence in Indonesia's fiscal resilience.

If not anticipated immediately, the government could be trapped in a cycle of ever-increasing deficits, increasing debt burdens, and limited fiscal space to support the people's basic needs.

According to Achmad, Indonesia's fiscal performance in early 2025 shows increasingly real and serious challenges. The decline in state revenue in 2025 by 20.85 percent compared to last year is a strong signal of pressure on Indonesia's fiscal foundation.

"The emergence of a fiscal deficit since the beginning of the year marks that 2025 can no longer be viewed as an ordinary fiscal year. Indonesia's fiscal resilience, which has been maintained for the past two years, is now at a crossroads between fiscal sustainability or the potential for a long-term deficit crisis," said Achmad.

Some circles also highlighted the Coretax factor as the cause of the decline in tax revenue. Achmad argued that instead of being the backbone of national taxation modernization, Coretax has become the main obstacle to the tax collection process in the last two months.

There are many reports from the field showing that taxpayers are experiencing serious difficulties, starting from the reporting process, payments, to accessing basic tax services.

Therefore, according to him, the government needs to review the Coretax roadmap by involving an independent audit of the system's weaknesses. On the other hand, other temporary alternatives are needed, such as reactivating some manual services or emergency systems, so that tax revenues can continue to run.

Similarly, Center of Economic and Law Studies (Celios) Researcher Nailul Huda opined that the decline in tax revenue in early 2025 occurred amidst the implementation of Coretax. In January 2025 alone, he said, the government lost potential tax revenue of Rp64 trillion, among other things due to the return of 2024 VAT restitution funds and Coretax constraints.

"As a result, transactions are hampered. The tax-to-GDP ratio in 2025 could be lower than in 2024. The implication is that the state budget deficit is vulnerable to widening above 3 percent and could potentially lead to impeachment," he said.