Indonesia collected Rp380 trillion in value-added tax and luxury goods sales tax in the first half of 2026 or 38.18 percent of its annual target. Strong growth in tax revenue compared to last year has put more pressure on enforcing tax rules. Slowing retail sales and lower consumer confidence have also increased that pressure. As a result, it is increasing production in the second half of the year to cover the budget shortfall.

JAKARTA, Thekabarnews.com—Indonesia is heading for a difficult second half of 2026. It has collected 38.18 percent of its annual value-added tax and luxury goods sales tax target by the end of June. Several indicators point to cooling household consumption.

Revenue from sales tax on luxury goods, locally known as PPnBM, and value-added tax (VAT), known as PPN, reached Rp380 trillion in the first half of the year. The government needs to collect some Rp615.3 trillion more to achieve its full-year target of Rp995.28 trillion.

The target is stated in the Finance Ministry’s 2026 State Budget Financial Note. It listed PPN and PPnBM as the second-largest tax revenue sources in Indonesia.

But the half-year data do not suggest a full-blown decline. VAT and luxury tax revenue increased 42.2 percent from the previous year. Meanwhile, overall tax collection rose 24.6 percent to Rp1.035 quadrillion.

The numbers indicate that collections have recovered well. This is partly because Coretax-related administrative problems created a weak comparison base in early 2025.

Bank Indonesia’s latest retail survey indicated softer demand. The Real Sales Index in May 2026 was 223.4—down 3.9 percent year-on-year (YoY). The central bank forecast that the index would decline another 0.8 percent month-on-month to 221.6 in June. Even so, it said overall retail activity remained relatively stable.

Sales of food, beverage, and tobacco fell 4.1 percent from a year earlier, and clothing sales dropped 12 percent. Bank Indonesia’s retail survey showed information and communications equipment contracted deeper by 18.4 percent.

Consumer confidence also declined. Bank Indonesia’s Consumer Confidence Index fell to 117.8 in June from 120.9 in May. Both the Current Economic Conditions Index and Consumer Expectations Index declined. The reading was still above the optimistic 100 level.

The figures suggest moderation rather than a broad-based economic slowdown. Statistics Indonesia reported the economy grew 5.61 percent from a year earlier in the first quarter. Household consumption contributed 2.94 percentage points to the expansion.

The authority will not be overly aggressive in collecting from businesses during an economic slowdown, said Tax Director General Bimo Wijayanto. The Directorate General of Taxes (DJP) will make better use of Coretax data. It will also improve risk-based supervision and broaden the tax base.

Bimo said earlier that CoreTax was the backbone of Indonesia’s tax reform. He stated that integrated real-time data would give officials a more accurate view of untapped tax potential.

The strategy has started to generate additional income. Tax-intensification programs have generated Rp74.8 trillion through June, up by about 33 percent YoY, with supervisory activities contributing Rp34.7 trillion.

Officials are also monitoring the rising imports of raw materials for textiles, petrochemicals, and animal feed. That should drive stronger domestic production and sales that could expand the VAT base in the second half.

Two factors will drive the outlook for VAT in Indonesia. The first factor is whether household spending stabilizes. The second is whether Coretax can improve compliance without adding to pressure on an economy showing early signs of softer consumption.