World Bank urges Indonesia to end tax holidays, tackle corporate tax evasion

The World Bank’s report on Indonesia’s tax system says the corporate income‑tax holiday scheme is losing relevance and recommends its removal within one to two years. It suggests replacing the holiday with performance‑based incentives and ending other special treatments such as reduced rates for construction services and listed companies. The bank also calls for a broader review of tax incentives to reduce overlap and inefficiency, and highlights the link between a deeper financial sector and higher tax compliance.

A separate World Bank survey finds that roughly one in four formal Indonesian firms is likely to evade taxes. Tax evasion is most common among non‑exporters, companies that view tax administration as a major obstacle, and firms facing strong informal competition. The survey notes that structural business conditions, rather than firm‑specific attributes, drive compliance behavior.