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Indonesia is preparing to sign a landmark memorandum of understanding (MoU) worth US$34 billion (approximately IDR 490 trillion) with the United States, covering three key sectors: energy, agriculture, and aviation.
One of the flagship initiatives under this MoU involves Garuda Indonesia’s planned acquisition of 75 new aircraft. Beyond its trade diplomacy significance, this agreement is expected to generate substantial fiscal and tax revenue opportunities for Indonesia.
Direct Tax Revenues and Economic Multipliers at Play
A large-scale investment of this magnitude could significantly boost government revenues, both directly—through corporate income tax (CIT) and value-added tax (VAT)—and indirectly through broader economic activity.
According to Indonesia’s Ministry of Investment (BKPM), every IDR 1 trillion invested can create up to 1,500 new jobs and yield an additional IDR 100–200 billion in VAT from capital goods and services transactions.
Even under a conservative scenario—assuming that 50% of the pledged investment materializes within 2–3 years—Indonesia could see tens of trillions of rupiah in additional tax revenue across multiple tax types.
The Directorate General of Taxes (DGT) has already outlined a set of measures to optimize tax collection from this deal, including:
- Upgrading taxpayer data by integrating the National Identification Number (NIK) system
- Enhancing tax administration system integration
- Strengthening compliance risk management (CRM) approaches tailored to emerging cross-border business models
These efforts are aligned with the Ministry of Finance’s broader mandate to maximize state revenue transparently and fairly.
Energy Sector: Tax Potential from Renewable Investments
The energy component of this MoU could unlock significant tax contributions, especially from renewable energy projects, which have benefited from fiscal incentives since 2020.
Currently, the energy sector accounts for around 7% of Indonesia’s total tax revenues, and fresh investment is expected to expand this share further via CIT, VAT, and land and building taxes (LBT) in the mining segment.
Additionally, technology transfer from U.S. partners could accelerate the country’s clean energy transition, aligning with Indonesia’s sustainability goals.
Agriculture Sector: Expanding Exports and Tax Base
In the agricultural sector, this partnership is anticipated to enhance productivity and boost export competitiveness.
Data from Statistics Indonesia (BPS) reveals that as of April 2025, Indonesia’s agricultural exports to the U.S. reached US$2.4 billion, marking an 8.2% year-on-year increase.
New investments would not only scale up production and improve product quality but also expand the tax base, particularly in key agricultural regions. This aligns with the DGT’s push to integrate NIK as Tax Identification Numbers (TINs), aiming to formalize the informal sector—including agriculture—and improve tax compliance.
Aviation Sector: Supporting Aviation Recovery and Tax Growth
Garuda Indonesia’s planned acquisition of 75 new aircraft is more than just a commercial transaction; it also signals the ongoing recovery of Indonesia’s aviation sector, which contracted by as much as 30% during 2020–2021.
According to the Ministry of Transportation, air traffic has rebounded by 12.7% in Q1 2025. The expansion is expected to drive higher tax revenues from VAT, employee income tax, and local airport-related levies.
The transportation sector contributes approximately 5.1% of Indonesia’s GDP and supports millions of direct and indirect jobs. With an estimated average aircraft revenue of US$100 million throughout its operational life, the long-term tax potential—over 15 to 20 years—could be highly significant.
DGT’s Data-Driven Strategy for Tax Optimization
The DGT has reaffirmed its commitment to ensuring optimal tax collection from this MoU by deploying a data-driven, collaborative, and transparent approach.
Over the past five years, the agency has implemented key reforms, including:
- Modernization of its tax administration system via DGT’s Coretax platform
- Upgrading taxpayer databases linked to NIK
- Strengthening IT infrastructure and digital services
However, Indonesia continues to face challenges in fully harnessing tax revenue from foreign direct investment (FDI). The country’s tax-to-GDP ratio remains stagnant at 10–11%, still below the 15% benchmark recommended by the Organization for Economic Co-operation and Development (OECD).
Large-scale deals like this MoU could serve as a crucial catalyst to improve Indonesia’s tax performance—provided they are accompanied by better data integration, enhanced information systems, and targeted taxpayer education.
Conclusion: A Strategic Opportunity for Indonesia’s Fiscal Future
The US$34 billion Indonesia-U.S. MoU is not merely an economic headline—it represents a concrete opportunity to:
- Strengthen Indonesia’s fiscal foundation
- Broaden the national tax base
- Deepen bilateral trade ties
With sustained institutional collaboration and robust oversight from the DGT, this initiative has the potential to significantly advance Indonesia’s long-term fiscal resilience and economic well-being.
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