The appointment of a new Minister of Finance has once again brought the idea of establishing a state revenue authority into focus. The issue has regained relevance after President Prabowo Subianto appointed Suahasil Nazara as Minister of Finance, replacing Purbaya Yudhi Sadewa.
Suahasil has extensive experience at the Ministry of Finance, including as Deputy Minister of Finance. Institutional reform of state revenue administration is not new in Indonesia’s fiscal policy.
Establishing a state revenue authority was one of the agenda items in the Prabowo-Gibran program for the 2024 election. The proposal was linked to a target of increasing the state revenue-to-GDP ratio to 23%.
To date, the proposed authority has not been established as a separate institution. Issues include its institutional design, allocation of authority, relationship with the Minister of Finance, budgeting, human resources, and accountability mechanisms.
An Old Debate
The idea of establishing a state revenue authority emerged before the Prabowo administration. The discussion dates back to at least 2004, when the government began considering separating state revenue functions from the Ministry of Finance.
At the time, the Ministry of Administrative and Bureaucratic Reform proposed that a more autonomous body manage revenue collected by the Directorate General of Taxes (DGT), the Directorate General of Customs and Excise (DGCE), and non-tax state revenue (penerimaan negara bukan pajak/PNBP).
The government considered two institutional alternatives. First, retain the Ministry of Finance structure with several improvements. Second, establish a non-ministerial government agency specifically responsible for managing state revenue.
The proposal did not lead to institutional changes. Regardless, debate over the position of state revenue authorities continued as part of the government’s reform agenda.
Between 2014 and 2016, the discussion gained renewed momentum through plans to transform tax administration into an authority with greater autonomy. One proposal involved establishing a tax revenue authority.
The concept was also discussed as part of reforms to the General Provisions and Procedures of Taxation (Ketentuan Umum dan Tata Cara Perpajakan/KUP) Law. Under the proposal, tax administration functions would be more clearly separated from tax policy formulation, which would remain under the Minister of Finance.
This separation is a principle underlying a revenue authority. The Minister of Finance would remain responsible for fiscal and tax policy, while the revenue authority would administer those policies through taxpayer services, supervision, audits, and collection.
Once again, the government did not implement the plan. Instead, it focused on tax reform, the tax amnesty program, developing the tax administration system, and bureaucratic reform within the Ministry of Finance.
A Political Agenda
The idea of a state revenue authority received renewed attention during the 2024 election. Institutional reform of state revenue administration was no longer discussed solely as a technocratic agenda but also became part of political programs.
The Prabowo Subianto-Gibran Rakabuming Raka ticket included establishing a state revenue authority in its Quick-Win Program. The proposal was linked to a target of increasing the state revenue-to-GDP ratio to 23%.
The Anies Baswedan-Muhaimin Iskandar ticket also proposed tax institutional reform by consolidating tax and customs authority into a new agency.
After the Prabowo administration was formed, the idea reappeared in government planning under the term state revenue authority. However, by the time the Minister of Finance changed, the authority had not been established as a separate institution.
The circumstance suggests that establishing a revenue authority is not simply a matter of political decision-making. The government would also need to determine its organizational structure, powers, relationship with the Ministry of Finance, budget scheme, human resources, and accountability system.
Establishment Rationale
One rationale for establishing a revenue authority is the need for greater autonomy in revenue administration. Such autonomy may cover organizational management, budgeting, human resources, technology, and business processes.
Another rationale is separating policy formulation from administration. The Minister of Finance could focus on fiscal and tax policy formulation, while the revenue authority would administer those policies.
In Indonesia, greater autonomy could give revenue administration more flexibility in performing its functions. Nevertheless, greater autonomy would also need strong accountability and oversight.
Accordingly, establishing a new institution should align with the administrative problems it is intended to address.
If the issue is budget constraints, institutional reform would need to be accompanied by changes to the budgeting scheme. If the issue is human resources, the reform would need to cover organizational structure, career systems, and remuneration.
If the issue is access to and integration of data, establishing a new authority would need stronger data-sharing systems. Institutional changes alone would not resolve these issues without corresponding administrative reforms.
International Insights
International experience shows that revenue authority can take many different forms. Their levels of autonomy and relationships with finance ministries, parliaments, and oversight institutions vary across countries.
Therefore, Indonesia cannot adopt a single model. International comparisons are more useful for identifying principles Indonesia can adapt to its needs.
One major question is the level of autonomy required. The government needs to determine whether the revenue authority should operate outside the Ministry of Finance or whether greater autonomy within the DGT and the DGCE would be sufficient.
Another question is whether a single authority should manage tax revenue and PNBP. Consolidation could foster coordination, but it could also create a larger, more complex organization.
Thus, international experience should inform the design of an institutional structure suited to Indonesia’s circumstances.
Impact on the Tax Ratio
The relationship between establishing a state revenue authority and increasing the tax ratio requires careful consideration. Institutional changes do not automatically increase state revenue.
A new authority alone would not broaden the tax base or improve compliance. Outcomes would still depend on tax policy, service quality, data systems, supervision, and law enforcement.
A revenue authority, therefore, is an instrument of administrative reform rather than an end in itself. Its success should be measured by improvements in revenue administration effectiveness and its contribution to the country’s fiscal capacity.
The tax ratio is also influenced by factors such as economic structure, economic cycles, tax policy, the composition of economic sectors, compliance levels, and calculation methods.
Accordingly, higher state revenue cannot be viewed as a direct consequence of establishing a state revenue authority. Achieving this goal requires reforms covering tax policy, administration, data, supervision, and law enforcement.
A New Opportunity
The appointment of a new Minister of Finance could provide an opportunity to reassess the idea of establishing a state revenue authority. Suahasil Nazara has extensive experience at the Ministry of Finance and thus has experience with state revenue issues from both policy and administrative perspectives.
However, a change of minister does not necessarily mean that the authority will be established soon. Establishing a new institution would still require clear policy decisions and a legal basis.
Institutional designs discussed in 2004 or 2016 would also need to be adapted to the state of tax administration in 2026. Over the past two decades, tax administration has changed through digitalization, financial information exchange, the growth of the digital economy, cross-border transactions, beneficial ownership, and technology use.
If the state revenue authority is revisited, the government would need to develop its institutional design based on the current challenges facing revenue administration rather than merely reviving an earlier proposal.
Institutional Designs
After over two decades, the discussion should focus on the type of revenue authority Indonesia needs, rather than whether to establish a new institution.
The goal of reform is to build an effective, professional, accountable, and adaptable state revenue system amid economic changes.
If a new authority would only transfer functions currently performed by the Ministry of Finance, the benefits of such institutional reform would need clear assessment. Conversely, if the change could expand administrative powers, support the budgeting system, improve human resources, enhance data usage, and clarify accountability, the proposal could warrant further consideration.
Establishing a new authority should also avoid fragmenting fiscal management. The Minister of Finance would still need to coordinate revenue, expenditure, financing, and fiscal sustainability. At the same time, the revenue authority would need sufficient room to perform its administrative functions professionally.
Institutional design needs to balance administrative autonomy with accountability. Operational independence should also remain within the framework of national fiscal policy.
The replacement of Purbaya Yudhi Sadewa with Suahasil Nazara as Minister of Finance does not indicate that a state revenue authority will be established soon. Regardless, the leadership change could create an opportunity to reassess the institutional design of state revenue administration.
The core issue is not who serves as Minister of Finance, but how to build a revenue authority that can bolster Indonesia’s fiscal capacity over the long term.
If the state revenue authority is discussed again, the focus should be on its functions, powers, resources, data usage, fiscal coordination, and accountability. Any new institution should provide measurable benefits to the state revenue system.
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