In Indonesia Prabowo’s austerity drive fuels protests, and climb downs
One town’s protest over huge land tax hikes has sparked national fury in Indonesia as local governments, grappling with deep funding cuts from Jakarta, take extreme measures.
Like a modern-day Marie Antoinette, the Mayor of Pati in Indonesia’s central Java, was not for turning when residents – struggling with living costs and an austerity drive eating into basic services – baulked this month at a 250 per cent property tax hike.
“Let them come. Five thousand, even 50,000. I will not back down,” Sudewo (who goes by one name) said flippantly when warned of rolling protests.
Predictably they did, gathering in their tens of thousands outside the town’s local government offices to demand a rollback of the extortionate tax hikes, which has since happened, and Sudewo’s resignation, which has not.
Sensing trouble, Jakarta moved to quell the uprising by unleashing its tamed tiger, the Corruption Eradication Commission (KPK), against Sudewo. He now faces graft charges linked to a railway development project.
But what looked at first like an orphan protest has triggered rolling demonstrations in other parts of the country where local governments, grappling with deep funding cuts from Jakarta, are taking extreme measures to make up revenue shortfalls.
Abdul Khalik, editor of independent online media site Omong Omong, says the Pati protests are an example of a spreading anger among Indonesians bearing the brunt of the austerity drive designed to raise money for Prabowo Subianto’s priority projects.
With a $45bn free school lunches program to fund on top of defence modernisation and food estate schemes, a looming $75bn debt interest payment due and tax revenue hovering at just 10 per cent of GDP, the president is having to rob Peter to pay Paul.
Provincial, regional and mayoral budgets are being throttled, leaving local officials scrambling to make up money elsewhere.
“Between 2024 and 2025, more than a dozen regions have quietly raised local taxes by hundreds of per cent, in some cases even up to 1000 per cent,” Mr Khalik wrote this week. “From vehicle registration fees to property levies, the economic burden on ordinary Indonesians is growing sharply. A population that feels taxed without service, ruled without empathy, and ignored when it speaks, will not stay silent forever.”
Homeowners in parts of east and central Java have reported land tax rises of more than 400 per cent while in West Java’s Cirebon some residents say their taxes have risen as much as 1000 per cent – a figure disputed by the mayor.
Home Minister Tito Karnavian told reporters this week he had cautioned all regional heads to consider their constituents’ capacity to pay when raising taxes. But it was clear by late Tuesday not everyone had got the message, with a protest in South Sulawesi turning violent over a rumoured land and building tax hike of 300 per cent.
The proposed increase was, in fact, 65 per cent, officials countered before backing down.
Indonesian economist Bhima Yudhistira says widespread anger over tax hikes is a “direct consequence of the central government’s budget efficiency measures” aimed at clawing back money for signature projects, and predicts worse is to come.
With more than 40 per cent of Indonesia’s local governments considered “fiscally vulnerable”, the added strain of further budget cuts next year could “spark waves of public resistance”, he told The Australian.
ANU economist Arianto Patunru says, in theory at least, it would be better for local government authorities to have more freedom to raise revenue in light of the expensive project commitments and Indonesia’s economic circumstance.
“Growth is stagnant, purchasing power is still low and we have the dynamics at the global level (such as US tariffs) to deal with,” Dr Patunru said.
“But when it comes to trying to raise revenue one of the key issues is how you communicate that to the public.”
Indonesia still has Southeast Asia’s highest unemployment at 4.76 per cent – despite the president’s recent boast it is the lowest since 1998 – and youth unemployment of 16 per cent.
Murdoch University’s Ian Wilson says Indonesians are seeing a “Trumpian disconnect between government rhetoric and reality”, and the protests are an inevitable consequence of local governments hitting the panic button over cuts.
“There are really only two things they can do in response; increase revenue, which is happening in Pati and other places, or reduce services. That is where things are at right now … and it seems pretty grim,” he said.
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