Indonesia’s tax revenue posted a strong start to 2026. According to the Ministry of Finance, tax collections reached IDR 646.7 trillion during the first four months of the year, up 16.1% from the same period a year earlier and accounting for nearly a quarter of the state’s annual revenue target.
Much of that growth came from value-added tax (VAT) and luxury goods sales tax (pajak penjualan atas barang mewah/PPnBM), which generated IDR 221.2 trillion and surged 40.2% year-on-year.
By contrast, corporate income tax revenue grew by just 5.1%, while collections from oil and gas income tax and stamp duty declined by 12%.
The divergence raises an important question. Why are indirect taxes such as VAT and PPnBM growing so much faster than other revenue sources?
When Tax Refunds Fall, Net Revenue Rises
Part of the answer lies in how much is returned. The sectoral data show that the trade sector, which contributed around a quarter of total tax revenue, totaling up to IDR 161 trillion, recorded gross growth of 14.8% but net growth of 47.6%.
Since net revenue reflects collections after deducting tax refunds, a larger gap between the two figures generally suggests that refund payments have fallen compared with the previous period.
That matters because tax refunds have become an increasingly significant feature of Indonesia’s tax administration.
Refund disbursements reached IDR 223 trillion in 2023, rose by 18.8% to IDR 265.67 trillion in 2024, and climbed by 35.94% further to IDR 361.2 trillion in 2025. By the end of the first quarter of 2026 alone, refunds had already totalled IDR 123.4 trillion.
A Tighter Tax Refund Regulation
Through Minister of Finance Regulation Number 28 of 2026, new requirements were introduced for taxpayers seeking preliminary refunds of tax overpayments.
Under this regulation, the government added requirements for taxpayers who meet specific criteria and wish to apply for a preliminary refund. Eligible taxpayers must have received an unqualified audit opinion without explanatory paragraphs for three consecutive years.
Additionally, taxpayers whose fiscal corrections exceeded 5% during the previous three years are also excluded from the accelerated refund scheme.
At the same time, many businesses continue to report that obtaining a refund remains a lengthy process. Even after a tax overpayment refund decree (surat keputusan pengembalian kelebihan pembayaran pajak/SKPKPP) has been issued, funds do not always reach taxpayers immediately.
Tax Refunds Are Not a Gift
From a fiscal perspective, delaying refunds may improve short-term revenue performance. From a legal perspective, however, the issue is more complicated.
When refunds are not processed within the statutory timeframe, the government may be required to pay interest to taxpayers. In cases where such compensation results from administrative negligence, it can raise questions about avoidable costs borne by the state.
A tax refund is not a concession granted at the government's discretion. It is the return of money that should not have been collected in the first place. Indonesia’s tax law explicitly grants taxpayers the right to seek refunds of overpaid taxes through the mechanisms provided under Articles 11, 17, 17B, 17C, and 17D of the Law of the Republic of Indonesia concerning General Provisions and Procedures of Taxation.
The same principle is reflected in the Taxpayer Charter, as set out in the Director General of Taxes Regulation Number PER-12/PJ/2025, which states that taxpayers have the right to pay only the amount legally owed. Viewed through that lens, legitimate overpayments that remain unrecovered for extended periods mean that taxpayers effectively bear a tax burden beyond what the law requires.
Why Tax Overpayments Occur
If policymakers want to curb the growth of tax refunds, tightening refund procedures alone is unlikely to solve the problem. The more important task is understanding why overpayments occur in the first place. Tax refunds arise when taxpayers pay more than they ultimately owe. The reasons vary widely, including:
- excess input VAT credits;
- Article 25 income tax installments that exceed final tax liabilities;
- over-withholding by third parties; and
- unique business circumstances leading to tax overpayments.
During periods of weaker economic activity, these overpayments can place additional pressure on business cash flow, making timely refunds increasingly important for taxpayers.
The VAT Challenge in Commodity Industries
One area that deserves closer attention is Indonesia’s VAT Law and its amendments, particularly in commodity sectors. Since the enactment of the Law of the Republic of Indonesia Number 7 of 2021 concerning the Harmonization of Tax Regulations, coal has been treated as a taxable good. As a result, coal producers are entitled to credit input VAT incurred on goods and services used in their operations.
Yet most coal production is export-oriented, and exports are generally subject to a 0% VAT rate. The consequence is that companies accumulate substantial VAT credits and frequently end up in refund positions. The government’s reliance on commodity-related tax revenue further complicates the picture. According to Director General of Taxes Bimo Wijayanto, part of the increase in refund claims during 2025 was linked to weaker commodity prices.
One approach would be to reconsider a windfall tax on extraordinary gains from commodity booms. Several countries, including Austria, Slovakia, Spain, and Finland, have introduced windfall taxes on industries that earn unusually high profits from external market conditions.
Austria, for example, introduced a 40% levy on 20% excess profits earned by oil and gas companies during periods of elevated energy prices. Finland has adopted similar mechanisms in parts of the energy sector, targeting on 120% of profits that significantly exceed historical norms.
Tax refunds should not be viewed as a fiscal burden or as a form of state generosity. They are a legal right guaranteed to taxpayers. Therefore, the challenge for policymakers is not simply to make refunds harder to obtain. It is to understand why overpayments occur and address structural weaknesses within the tax system.
