Improving tax environment helps Indonesia move up latest World Bank rankings

November 2015

A recent report from the World Bank suggests Indonesia’s business environment has shown considerable improvement over the past 12 months.

Published annually, the World Bank Doing Business project provides objective measures of business regulations for local firms in 189 economies worldwide. The new report, Doing Business 2016: Measuring Regulatory Quality and Efficiency, shows Indonesia ranked in 109th place in terms of overall ease of doing business, up 11 places on last year’s ranking of 120th. The report’s assessment of the country’s tax environment has also improved, with the country moving up 12 places from 160th to 148th.

Member firms of the Russell Bedford International accounting network, including KAP Syarief Basir dan Rekan, contributed data to the report’s Paying Taxes survey.

The reason for the country’s improved performance on tax can be traced, in part, to the lower number of returns that businesses are now required to make. Whereas companies were previously required to make 65 separate tax payments per year, they are now only required to make 54. While still seriously in excess of the regulatory burden in OECD high-income countries (where businesses spend only 176.6 hours per year on their tax compliance), companies in Indonesia have at least seen a significant reduction here over the past 12 months, now spending 234 hours per year on their tax returns, in contrast to 253.5 last year.

Syarief Basir, managing partner, commented: “Naturally it is gratifying to see an easier environment for Indonesia’s entrepreneurs. But businesses here are still spending 76 hours per year more on tax compliance than their peers in OECD countries. Indonesia will not be genuinely competitive in international markets until further reform is undertaken to correct this.”