Introduction

Indonesia’s weakening consumer purchasing power has become one of the key challenges to tax revenue collection in 2026. Slower household spending has reduced Value Added Tax (VAT) and Luxury Goods Sales Tax (LGST) collections, prompting the Directorate General of Taxes (DGT) to adopt new strategies to maintain state revenue.

Rather than increasing the tax burden on taxpayers, the DGT is focusing on technology, data integration, and tax administration improvements to strengthen revenue collection.

VAT Revenue Remains Below the 2026 Target

As of the first half of 2026, VAT and Luxury Goods Sales Tax (LGST) revenue reached approximately IDR 380 trillion, representing only 38.18% of the 2026 State Budget (APBN) target of IDR 995.28 trillion.

This reflects the impact of slowing domestic consumption on Indonesia’s tax revenue, particularly taxes generated from consumer spending.

Why Is Tax Revenue Slowing Down?

Several economic indicators suggest that household purchasing power has yet to fully recover, including:

• Declining retail sales.
• Lower consumer confidence.
• Reduced household spending.

Since VAT is collected on the consumption of goods and services, weaker consumer spending directly affects VAT revenue.

How Is the DGT Responding?

Director General of Taxes Bimo Wijayanto emphasized that the DGT will not increase tax pressure during the current economic slowdown.

Instead, the tax authority will focus on several strategic initiatives, including:

• Strengthening data integration and interoperability across government systems.
• Optimizing the Coretax system to monitor tax revenue in real time.
• Expanding the national tax base to maintain sustainable revenue growth.

These measures are designed to improve tax administration efficiency while supporting economic recovery without imposing additional burdens on taxpayers.

Industries Showing Positive Growth

Although household consumption remains weak, several industries continue to demonstrate positive momentum through higher imports of production materials, including:

• Textile Industry
• Petrochemical Industry
• Animal Feed Industry

The increase in raw material imports indicates that manufacturing activity is expected to strengthen during the third and fourth quarters of 2026. Higher production activity could ultimately contribute to stronger VAT revenue in the coming months.