Tax issues are once again drawing attention. The government is reportedly deferring the disbursement of tax overpayment refunds (restitutions). Throughout 2025, the value of restitutions was reported to have reached IDR 361 trillion, a significant increase compared to previous years. In 2023 alone, the realization of tax refunds amounted to IDR 232.2 trillion. This surge has triggered serious concerns from a fiscal perspective.
The response? Deferral. A number of ongoing refund claims are deferred, on the grounds of alleged leakages in state revenue, and are currently being subject to stricter audits by the Financial and Development Supervisory Agency (BPKP).
This policy has sparked debate, not only due to the substantial amounts involved, but also because it touches upon a fundamental principle in taxation: the rights of taxpayers.
Concerns from the Business Sector
On the ground, the impact is immediately felt. Businesses across various sectors, from retail to mining, are voicing similar concerns. The deferral of refunds is expected to disrupt corporate cash flows.
The issue is straightforward. Refunds are not merely figures in financial statements. They represent actual funds required for operations, such as paying salaries, purchasing raw materials, and maintaining production.
Herein lies the paradox.
On one hand, the government defers refunds in the name of fiscal prudence. On the other hand, it is preparing a policy to accelerate tax refunds through the Preliminary Refund of Overpaid Tax scheme, which will take effect in May 2026.
These two policy directions create mixed signals. The business community is not seeking excessive incentives, but certainty.
Not an Incentive
It is important to clarify that tax refunds are not government incentive.
A refund constitutes a taxpayer’s right arising from an overpayment of taxes that has already been paid to the state treasury. In other words, such funds have always belonged to the taxpayer. However, the process of reclaiming these overpayments is often complex.
The state has established rigorous verification mechanisms, ranging from administrative reviews to comprehensive audits. In many cases, taxpayers must undergo lengthy legal processes, including objections, appeals, and judicial reviews before the Supreme Court.
These legal processes require significant time, effort, and cost, and may extend over several years.
Once all procedures have been completed and a legally binding decision (inkracht) confirms the taxpayers’ entitlement to the overpayment, the state is obligated to fulfill its duty, namely, to return their funds.
If the refund is subsequently deferred on grounds outside the established administrative process, the issue at hand is no longer procedural compliance, but the state’s commitment to legal certainty.
Refund Without Liquidity
The issue does not end with refund deferral. Even when refunds are approved, implementation in the field often gives rise to new concerns, frequently accompanied by “terms and conditions.”
In practice, approved refunds are often not disbursed in cash. Instead, the funds are converted into tax deposits within the coretax system.
Technically, these deposits may be utilized to settle future tax liabilities. However, from a business perspective, this treatment does not resolve the underlying issue. Companies require liquidity, not digital balances that are restricted to tax payments.
Furthermore, in practice, there are often unwritten suggestions that such deposits should not be immediately utilized to settle current-year tax liabilities.
If such practices occur on a widespread basis, they will represent not merely administrative policy, but a de facto restriction of taxpayer rights.
Upstream Solutions
If the government’s objective is to control the surge in refunds and safeguard the State Budget (APBN), the current approach appears misguided.
The issue does not lie in downstream refunds, but in the upstream design of tax collection.
Instead of deferring refunds, the government could prevent overpayments from occurring in the first place. This may be achieved by expanding access to tax facilities, such as reductions in Income Tax Article 25 installments, the issuance of Tax Exemption Certificates (SKB) for Value Added Tax or Income Tax, and the implementation of tax payment adjustments based on more realistic business projections.
In the context of Income Tax Article 25, the government possesses an instrument to mitigate future downstream refund risks, namely Director General of Taxes Regulation Number PER-11/PJ/2025. This regulation allows taxpayers to adjust their installments if projected tax payable decreases below 75%.
However, the effectiveness of this policy depends heavily on the responsiveness and timeliness of the tax authority in processing such applications. Rather than complicating refunds at the end of the process, optimizing installment reductions during the fiscal year represents a healthier solution, for both business cash flows and the credibility of State Budget management.
Additionally, the government may expand and simplify access to SKB for Income Tax Articles 21, 22, 22 (import), and/or 23 as regulated under Director General of Taxes Regulation Number PER-8/PJ/2025. For companies experiencing losses or operating with thin margins, upfront withholding or collection obligations often impose unnecessary liquidity burdens.
Rather than requiring taxpayers to pay funds that must later be reclaimed through lengthy refund processes, granting an SKB at the beginning would help sustain business operations without reducing actual tax revenue potential.
A simple example is a company with a specific business model, such as an importer with thin margins, which consistently operates in an overpaid tax position. In such cases, overpayment is not an anomaly, but a consequence of system design. With appropriate treatment from the outset, companies would not need to effectively “lend” funds to the state, only to reclaim them through a prolonged process.
This approach is fiscally healthier, as it avoids the illusion of inflated state cash balances while maintaining business liquidity.
Maintaining Trust
Maintaining the performance of the State Budget is indeed critical. However, fiscal stability should not come at the expense of business certainty.
A modern tax system is fundamentally built on trust. When taxpayer rights, such as refunds, are delayed or obstructed, that trust erodes.
In a global context, the efficiency of refund processes is a key indicator in assessing a country’s investment attractiveness. The World Bank, through both the Ease of Doing Business Index and its latest Business Ready 2024 publication, identifies post-filing processes, including the speed of refunds, as a primary benchmark of a country’s business climate.
This means that the international community evaluates not only the scale of incentives offered, but also the efficiency with which a country administers taxpayer rights after obligations have been fulfilled. Systematic delays in refunds risk undermining Indonesia’s fiscal credibility in the eyes of global investors.
Moreover, pressure on business cash flows today may directly affect their ability to sustain and expand operations. In the long term, this condition may erode the very base of tax revenue.
Therefore, the government must reconsider its perspective on refunds. Refunds are not leakages to be closed, but indicators of underlying issues in the tax collection mechanism that requires improvement.
The appropriate reform is not to defer rights at the end of the process, but to ensure that the system operates more fairly and accurately from the outset. (KEN)
Disclaimer! This article is a personal opinion and does not reflect the policies of the institution where the author works.
