Reproducibility package for Estimating Value Added Tax (VAT) and Corporate Income Tax (CIT) Gaps in Indonesia

2024

Get Reproducibility Package

Reference ID

FR_IDN_2024_203

Author(s)

Rong Qian, Grzegorz Poniatowski

Collections

Flagships and Reports

Metadata

JSON

Created on

Nov 14, 2024

Last modified

May 09, 2025

Overview

Abstract

Despite their subdued collection efficiency, VAT and CIT are the main sources of government revenue in Indonesia. The sources of the forgone revenue in VAT and CIT remained largely unknown. This paper aims to close this knowledge gap. It finds that the gaps in VAT and CIT accounted for 6.4 percent of GDP on average between 2016 and 2021. Overall, non-compliance had a larger impact on the tax gap‒contributing to 58 percent of total forgone notional revenue from these tax instruments. The compliance gaps are very high compared to international peers. They have increased considerably in 2020, likely caused by the economic consequences of the COVID-19 pandemic, resulting in higher incentives to evade and defer tax payments. Despite some decline observed in 2021, the compliance gaps remained elevated compared to the pre-pandemic period. The policy gaps are relatively smaller but also contributed to significant revenue loss. The policy gaps have declined because of the deflation of nominal thresholds, reducing the scope of concessions in the VAT and CIT systems for small and medium-size companies

Reproducibility Package

Scripts

Readme Get Reproducibility Package

Link: https://reproducibility.worldbank.org/index.php/catalog/212/download/608/README.pdf

Reproducibility package (partial data and instructions) for Estimating Value Added Tax (VAT) and Corporate Income Tax (CIT) Gaps in Indonesia

Title

Reproducibility package (partial data and instructions) for Estimating Value Added Tax (VAT) and Corporate Income Tax (CIT) Gaps in Indonesia

Date

2024-11

Dependencies

The reproducibility package does not use external dependencies

Notes

Computational reproducibility verified by the Development Impact (DIME) Analytics team, World Bank.

Software

Excel

Name

Excel

Version

Microsoft Excel for Microsoft 365 MSO

Reproducibility

Technology environment

Paper exhibits were reproduced in a computer with the following specifications:
• OS: Windows 10 Enterprise
• Processor: Intel(R) Xeon(R) Gold 6226R CPU @ 2.90GHz 2.90 GHz (2 processors)
• Memory available: 32 GB
• Software version: Microsoft Excel for Microsoft 365 MSO

Reproduction instructions

To successfully replicate the analysis provided in this package, users should follow the instructions in the README file and replicate the analysis using the Excel sheets. Some data is restricted, so users will not be able to verify CIT revenue values for Figures 3.12, 3.13, 3.14, 3.15, 3.16, 3.17, and 4.2. All restricted data values are highlighted in red for reference

Data

Datasets

Domestic Transactions at Basic Price

Name

Domestic Transactions at Basic Price

Note

Source: Badan Pusat Statistik (BPS) - Statistics Indonesia Located at: 1_use_tables_rescaling.xls, sheet 2016-2021

Access policy

Publicly available and included in the reproducibility package

Data URL

https://www.bps.go.id/en/statistics-table/1/MjExNiMx/indonesian-input-output-table-domestic-transactions-at-basic-price--185-products---2016--million-rupiah-.html

Gross Domestic Product (GDP) by Expenditure

Name

Gross Domestic Product (GDP) by Expenditure

Note

Source: Badan Pusat Statistik (BPS) - Statistics Indonesia Located at: 1_use_tables_rescaling.xls, sheet "Expenditure"

Access policy

Publicly available and included in the reproducibility package

Data URL

https://www.bps.go.id/en/statistics-table/2/MTk1NSMy/-2010-version--1--gdp-at-current-market-prices-by-expenditure--billion-rupiahs-.html

Value Added Tax (VAT) revenue data

Name

Value Added Tax (VAT) revenue data

Note

Source: Badan Pusat Statistik (BPS) - Statistics Indonesia Located at: 2_VAT_compliance_gap_model.xlsx, sheet "Revenue"

Access policy

Publicly available and included in the reproducibility package

Data URL

https://www.bps.go.id/en/statistics-table/2/MTA3MCMy/actual-government-revenues--billion-rupiahs-.html

GFCF (Gross Fixed Capital Formation) by Industrial Origin

Name

GFCF (Gross Fixed Capital Formation) by Industrial Origin

Note

Source: Badan Pusat Statistik (BPS) - Statistics Indonesia Located at: 2_VAT_compliance_gap_model.xlsx, sheet "GFCF"

Access policy

Publicly available and included in the reproducibility package

Data URL

https://www.bps.go.id/en/statistics-table/2/MjA3NSMy/gfcf-by-industrial-origin-and-24-types-of-asset--billion-rupiahs-.html

Tax Expenditure Report

Name

Tax Expenditure Report

Note

Source: Badan Kebijakan Fiskal Located at: 2_VAT_compliance_gap_model.xlsx, sheet "Other adjustments"

Access policy

Publicly available and included in the reproducibility package

Data URL

Source: https://fiskal.kemenkeu.go.id/publikasi/tax-expenditure-report

GDP at Current Market Prices by Expenditure

Name

GDP at Current Market Prices by Expenditure

Note

Source: Badan Kebijakan Fiskal Located at: 5_All_PGs.xlsx, sheet "Figure 4.1"

Access policy

Publicly available and included in the reproducibility package

Data URL

https://www.bps.go.id/en/statistics-table/2/MTk1NSMy/-2010-version--1--gdp-at-current-market-prices-by-expenditure--billion-rupiahs-.html

Financial Corporation – Sectoral Accounts and Balance Sheets

Name

Financial Corporation – Sectoral Accounts and Balance Sheets

Note

Source: Badan Pusat Statistik (BPS) - Statistics Indonesia Located at: 6_CIT_gaps_model.xlsx, sheet "1_Summary - actual liability", "2_Summary - potential", "3_Summary - final regime", "4_Summary - public and SMEs"

Access policy

Publicly available and included in the reproducibility package

Data URL

https://www.bps.go.id/en/statistics-table/1/MjE4MyMx/financial-corporation---sectoral-accounts-and-balance-sheets--trillions-rupiah---2016---2022.html

Non-Financial Corporation – Sectoral Accounts and Balance Sheets

Name

Non-Financial Corporation – Sectoral Accounts and Balance Sheets

Note

Access policy

Publicly available and included in the reproducibility package

Data URL

https://www.bps.go.id/en/statistics-table/1/MjE4MiMx/non-financial-corporation---sectoral-accounts-and-balance-sheets--trillions-rupiah---2016---2022.html

World Bank Enterprise Survey Report (2023)

Name

World Bank Enterprise Survey Report (2023)

Note

Source: World Bank Enterprise Survey Located at: 6_CIT_gaps_model.xlsx, sheet "Figure 4. Figure 4 uses data from this report and restricted administrative data from the Ministry of Finance. Therefore, the figure values are restricted and not included in the package.

Access policy

Publicly available but not included in the reproducibility package.

Data URL

https://www.enterprisesurveys.org/content/dam/enterprisesurveys/documents/country/Indonesia-2023.pdf

Administrative Tax data

Name

Administrative Tax data

Note

Source: Ministry of Finance’s Directorate General of Taxes, Bundes Finanz Ministerium (BKF) Located at: 6_CIT_gaps_model.xlsx, sheet "Figure 4.

Access policy

Restricted and not included in the package.

Corporate Income Tax (CIT) Revenue data

Name

Corporate Income Tax (CIT) Revenue data

Note

Source: Ministry of Finance’s Directorate General of Taxes, Bundes Finanz Ministerium (BKF) Located at: CIT revenue.xlsx, Confidential input for CIT calculation.xlsx, Social transfers in kind.xlsx

Access policy

Restricted and not included in the package.

Data statement

Some data is restricted and has not been included in the reproducibility package.

Description

Output

Estimating Value Added Tax (VAT) and Corporate Income Tax (CIT) Gaps in Indonesia

Type

World Bank Reports & Flagships

Title

Estimating Value Added Tax (VAT) and Corporate Income Tax (CIT) Gaps in Indonesia

Authors

Rong Qian, Grzegorz Poniatowski

URL

http://documents.worldbank.org/curated/en/099030225225027356

Authors

Author	Affiliation	Email
Rong Qian	World Bank	rqian@worldbank.org
Grzegorz Poniatowski	Syntesia Policy & Economics	grzegorz.poniatowski@syntesia.eu

Date of production

2024-11

Scope and coverage

Geographic locations

Location	Code
Indonesia	IDN

Disclaimer

The materials in the reproducibility packages are distributed as they were prepared by the staff of the International Bank for Reconstruction and Development/the World Bank. The findings, interpretations, and conclusions expressed in this event do not necessarily reflect the views of the World Bank, the Executive Directors of the World Bank, or the governments they represent. The World Bank does not guarantee the accuracy of the materials included in the reproducibility package.

Access and rights

License

Name	URI
Modified BSD3	https://opensource.org/license/bsd-3-clause/

Contacts

Name	Affiliation	Email
Rong Qian	World Bank	rqian@worldbank.org
Reproducibility WBG	World Bank	reproducibility@worldbank.org

Information on metadata

Producers

Name	Abbreviation	Affiliation	Role
Reproducibility WBG	DIME	World Bank - Development Impact Department	Verification and preparation of metadata

Date of Production

2024-11-05

Document version

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