Indonesia's accession to the Organisation for Economic Co-operation and Development (OECD) is not merely an effort to expand international economic cooperation, but also forms part of the national policy reform agenda. In taxation, this process encourages regulatory alignment, stronger administration, greater transparency, and the implementation of international tax standards.
After submitting the Initial Memorandum on June 3, 2025, Indonesia has now entered the technical review phase by OECD committees. To what extent is Indonesia prepared to meet OECD standards? What are the achievements and challenges in the accession process, and what are the implications for Indonesia's tax policies and obligations?
History and Role of the OECD
The OECD originated from the Organisation for European Economic Co-operation (OEEC), established in 1948 to manage the Marshall Plan aid for European economic recovery. This organization subsequently evolved into the OECD through a convention signed on December 14, 1960, which came into effect on September 30, 1961. From its 20 founding nations, OECD membership has expanded to 38 countries, with Costa Rica becoming the newest member in 2021.
The OECD serves as a forum for cooperation and for formulating international economic policy standards through various legal instruments, such as conventions, decisions, and recommendations known as the OECD acquis. In taxation, these standards include the OECD Model Tax Convention, the OECD Transfer Pricing Guidelines, the Base Erosion and Profit Shifting (BEPS) initiative, and the standard for Automatic Exchange of Information (AEOI). A number of Indonesian tax provisions, including Minister of Finance Regulation (PMK) 172/PMK.03/2023, also refer to these standards. However, as of 2026, Indonesia has not yet officially joined the OECD.
The OECD accession process includes opening discussions by the OECD Council, drafting an Accession Roadmap, submitting an Initial Memorandum, and reviews by relevant committees. Each committee will provide a formal opinion on how well the candidate country's policies align with OECD standards. The final decision to invite a country to become a member must be unanimously approved by all members of the OECD Council. Currently, eight countries are candidates, with Indonesia and Thailand becoming the first two Southeast Asian nations to do so in 2024.
Indonesia's Steps Towards the OECD
Indonesia's relationship with the OECD has actually been long-standing. Indonesia has been a Key Partner since 2007, an invitee to the Development Assistance Committee since 2013, and by 2020 had adopted 15 OECD legal instruments, including in the areas of tax compliance and the digital economy. In 2023, the Government expressed its official intent to join. The OECD Council subsequently opened accession discussions on February 20, 2024, and adopted the Accession Roadmap on March 29, 2024.
The Government's objective is not solely about prestige. Accession is viewed as a reform anchor to escape the middle-income trap, improve governance, and attract high-quality investments. To oversee the process, the Government established the National Accession Team through the Decree of the Coordinating Minister for Economic Affairs Number 232 of 2024. The results have been quite concrete. The Initial Memorandum was completed about a year after the roadmap was received, and 25 OECD committees are currently conducting technical reviews. In October 2026, the Coordinating Minister for Economic Affairs said progress has reached 75% to 80%, and that membership is targeted within two years.
However, this timeline needs to be interpreted with caution. In early 2024, the Government targeted two to three years. The target then shifted to three to four years just for the technical reviews, before being accelerated again to two years. The OECD does not set a deadline, so the speed of accession depends on the quality of the reforms implemented by the candidate country.
Indonesia’s Key Challenges
Although the momentum is maintained, the challenges ahead are substantial. The first challenge lies in governance and corruption eradication. The OECD has a strong anti-corruption agenda, while Indonesia ranks 115th out of 180 countries in Transparency International's 2023 Corruption Perceptions Index. Several analysts also highlight the need to strengthen the performance and independence of institutions such as the Corruption Eradication Commission (Komisi Pemberantasan Korupsi/KPK) and the Supreme Audit Agency (Badan Pemeriksa Keuangan/BPK) from government control.
The second challenge is the quality and stability of regulations. Rapid regulatory changes, overlapping authorities, and controversies surrounding the Job Creation Law are seen as complicating legal certainty. The third challenge is the governance of State-Owned Enterprises (SOEs), particularly regarding the establishment of Danantara, which needs to be aligned with the OECD Guidelines on Corporate Governance of State-Owned Enterprises.
From a taxation perspective, the biggest challenge is fiscal capacity. Indonesia's tax ratio is around 12.1% of GDP, far below the OECD average of nearly 30%. In its 2025 report, the World Bank estimated that the tax gap from collection inefficiencies reached 6.4% of GDP during 2016–2021. The revenue structure also still relies heavily on commodities and indirect taxes, while the personal income tax base is relatively narrow. The OECD will assess not only the alignment of rules but also the country's ability to enforce them.
On the other hand, progress is noteworthy. Indonesia has joined the BEPS Inclusive Framework, implemented the automatic exchange of information (AEOI) since 2018, applied transfer pricing provisions based on the arm's length principle through PMK 172/PMK.03/2023, and regulated the global minimum tax through PMK 136 of 2024 and PER-6/PJ/2026.
Strategic Benefits of Membership
For Indonesia, OECD membership offers several benefits. First, it enhances policy credibility. OECD membership can serve as an indicator of a country's governance quality and economic policies. This can boost investor confidence, improve risk perception, and lower the cost of capital.
Second, it opens access to the exchange of knowledge and policy experiences. Indonesia can discuss and exchange experiences with member countries through various committees covering education, business competition, investment, and other policies.
Third, it drives reform consistency. OECD standards can serve as an external benchmark to sustain reforms despite government changes. In taxation, alignment with OECD standards can increase legal certainty, reduce the risk of disputes and double taxation, and limit tax avoidance practices.
For the OECD, Indonesia's membership also holds strategic value. As Southeast Asia's largest economy and the world's fourth most populous country, Indonesia can expand the OECD's representation in the Asia-Pacific region. So far, the region has been represented mainly by countries such as Japan, South Korea, Australia, and New Zealand. Indonesia's inclusion can also strengthen the relevance and legitimacy of OECD standards amidst Asia's growing role in the global economy.
Indonesia’s Strategic Steps
Indonesia's accession to the OECD is a policy and governance reform process that requires long-term commitment. However, challenges in public governance, regulatory certainty, and fiscal capacity still need to be resolved. Accession success depends on policy alignment and effective implementation, not just completing administrative documents.
To support the accession process, there are seven steps that require the government's attention:
First, the government must make tax reform a priority for accession. This requires broadening the tax base, especially regarding personal income tax and the digital economy sector, reducing reliance on commodity sector revenues, and gradually increasing the overall tax ratio.
Second, maintaining regulatory stability and certainty is essential. Every change in tax regulations needs to be preceded by a regulatory impact analysis and public consultation, and accompanied by an adequate transition period. This step ensures regulations can be implemented consistently and provides true legal certainty for taxpayers.
Third, the government must strengthen tax administration. This includes finalizing the improvement and stabilization of the Core Tax Administration System (Coretax) and reinforcing the protection of taxpayer rights in accordance with the Taxpayer's Charter as stipulated in PER-13/PJ/2025. A reliable tax administration is essential to implement OECD standards.
Fourth, there is a pressing need to strengthen integrity and law enforcement. The government needs to strengthen the independence of anti-corruption and audit institutions, improve the handling of tax crimes, and strictly comply with OECD anti-bribery standards.
Fifth, aligning the governance of State-Owned Enterprises (SOEs) and Danantara with OECD guidelines is crucial. These adjustments must encompass transparency, fair tax treatment, and a clear separation between ownership and regulatory functions.
Sixth, the government must continuously evaluate its tax incentive policies. Tax incentives should be granted in a timely, targeted manner, with a clear timeframe. Thorough evaluations are also needed to ensure that implementing the global minimum tax does not overlap with or conflict with domestic tax incentive policies.
Seventh, increasing the involvement of the business community and the public is vital. The government needs to actively engage business players and citizens in the policy formulation and evaluation process so that the implemented reforms accurately reflect practical needs and conditions on the ground.
Indonesia's accession process to the OECD brings both opportunities and challenges, including in taxation. Ideatax stands ready to assist companies in understanding and anticipating the implications of OECD standards on their tax policies and obligations.
Legal References
- Law Number 7 of 2021 on the Harmonization of Tax Regulations (UU HPP).
- Government Regulation Number 55 of 2022 concerning Adjustment of Income Tax Provisions.
- Minister of Finance Regulation Number 172/PMK.03/2023 on the Application of the Arm's Length Principle to Related-Party Transactions.
- Minister of Finance Regulation Number 136 of 2024 on the Implementation of a Global Minimum Tax Under International Agreements.
- Director General of Taxes Regulation Number PER-13/PJ/2025 on the Taxpayer's Charter.
- Director General of Taxes Regulation Number PER-6/PJ/2026 on Procedures for Implementing Rights and Fulfilling Global Minimum Tax Obligations Based on International Agreements.
- Coordinating Minister for Economic Affairs Decree Number 232 of 2024 on Members of the Indonesian National Accession Team.
- Roadmap for the OECD Accession Process of Indonesia, C(2024)66/FINAL, adopted by the OECD Council on March 29, 2024.