A Simple Study of Tax Morale in Indonesia

by Fatikha Faradina, a Directorate General of Taxes officer 

In the intricate dance between the state and its citizens, taxation plays a pivotal role, not merely as a financial mechanism, but as a symbol of collective responsibility. At the heart of effective tax systems lies an often-overlooked factor: tax morale. Frey & Torgler in “Tax Morale and Conditional Cooperation” (2007) stated that tax morale is the intrinsic motivation to pay taxes. Tax morale refers to a person’s intrinsic motivation to willingly pay taxes, even beyond what is legally enforced. It reflects the social contract between the government and its citizens.

Despite Indonesia’s economic growth and expanding digital tax base, the country’s tax ratio remains persistently low, averaging around 10–12% of gross domestic product (GDP) over the past decade. In 2022, it stood at 10.39%, and slightly dipped to 10.31% in 2023, far below the the Organization for Economic Co-operation and Development (OECD) average of over 30% and even below several regional peers. Although preliminary estimates for 2024 suggest a rebound to 11.8%, the figure still reflects a structural weakness in Indonesia’s revenue mobilization capacity. In Indonesia, where the tax ratio remains low compared to regional peers, understanding and rebuilding tax morale is not just a fiscal imperative, it is a national priority.

Tax morale reflects a citizen’s willingness to contribute to public finances even when enforcement is weak. It goes beyond legal obligation and delves into notions of fairness, trust, and civic identity. High tax morale is typically found in societies where citizens believe that taxes are used wisely and equitably. Countries like Sweden and Denmark have consistently maintained strong tax morale, anchored in their transparent governance and high-quality public services. In contrast, low tax morale often correlates with widespread perceptions of corruption, inefficient public spending, and a lack of trust in government institutions. The logic of reciprocity becomes distorted: why should citizens pay their dues when the state is seen as unaccountable? Tax morale in Indonesia is deeply influenced by governance quality, perceived fairness, and social trust, factors that must be addressed to strengthen voluntary compliance and tax revenue sustainability.

Indonesia’s struggle with tax morale is deeply rooted in its historical, political, and cultural fabric. Despite multiple tax reform waves, Indonesia’s tax ratio has hovered between 9% and 11%, a figure far below the 15% benchmark often cited for sustainable development. According to OECD and World Bank studies, the primary obstacles include not only technical loopholes and informality but also low taxpayer trust in how revenues are managed and redistributed.

Indonesia has not been idle in addressing these challenges. At the forefront of these reforms stands the Directorate General of Taxes (DJP), which has undertaken significant institutional and technological transformations to build a more credible, service-oriented, and transparent tax administration. Key reforms have been rolled out to modernize the tax system and improve compliance such as.

1. Coretax Administration System: this integrated platform is designed to unify taxpayer data, enhance automation, and enable real-time analytics to detect non-compliance. Coretax represents a paradigm shift from fragmented legacy systems toward a centralized infrastructure that supports not only enforcement but also taxpayer service delivery. By simplifying reporting and reducing bureaucratic friction, DJP aims to improve voluntary compliance and signal a more modern, professional tax authority.
2. Service Orientation and Public Engagement: beyond enforcement, DJP has shown increasing commitment to fostering taxpayer-centric services. Frontliner training, improvements in service quality at Tax Offices (KPP), and the integration of digital platforms such as e-Form, e-Bupot, and e-PHTB have eased administrative burdens. Moreover, DJP's outreach efforts—particularly through tax education programs (Pajak Bertutur), social media campaigns, and school-university partnerships—reflect a long-term investment in shaping tax morale at the cultural level.

Tax morale cannot be legislated into existence, it must be earned. While laws and systems provide structure, the spirit of tax compliance lies in trust. Sweden is often cited as a global benchmark for high tax morale, where citizens exhibit a strong willingness to pay taxes despite relatively high rates. Sweden's tax-to-GDP ratio is approximately 42% (based on OECD data from 2022–2023). This phenomenon is rooted not in fear of punishment but in deep social trust and strong civic norms. Indonesia must continue to invest in clean governance, equitable enforcement, and transparent spending to reframe taxation not as an obligation, but as an opportunity for citizens to co-author the nation’s future. In reclaiming trust and restoring reciprocity, Indonesia has the chance to not only boost its fiscal capacity but also strengthen the democratic bonds that tie its citizens to the state.

While structural reform and digital innovation are essential, tax education represents a long-term investment in shaping the civic mindset of future generations. Tax education should not be confined to isolated events or once-a-year campaigns. Instead, it must become a permanent feature in school curricula, starting from basic concepts in primary education to more critical engagement in higher education. When young citizens are taught to understand why taxes matter, how they fund public goods, reduce inequality, and build infrastructure, they are more likely to view taxation as a civic contribution, not just a bureaucratic obligation.

A nation’s greatness is not measured by how little it taxes, but by how wisely it spends and how willingly its people contribute to a shared future. Joseph E. Stiglitz, Nobel Prize-winning economist and former Chief Economist of the World Bank once said that:

“Taxes are what we pay for a civilized society. Too many want the civilization at too little cost.”

*) Artikel ini merupakan pendapat pribadi penulis dan bukan cerminan sikap instansi tempat penulis bekerja.

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