TAX REFORM IN EFFORTS TO OPTIMIZE REVENUE IN THE TAX SECTOR OF TIMOR LESTE

Abstract This article is motivated by the idea of implementing tax reform as an effort to optimize Timor Leste’s tax revenue, which has historically been dominated by income from oil and gas. Tax sector revenue has thus far only reached approximately 10%, threatening national financing due to fluctuations in global oil prices. This study employs a literature review approach. Data were collected from official reports, financial statements of the Timor Leste Ministry of Finance (Book 1), and from various countries, international organizations such as OECD, World Bank, IMF, UNDP, research institutions, and published research journals. Data analysis was conducted using a comparative approach. The findings indicate that, firstly, the appropriate tax reform strategy to optimize revenue in Timor Leste’s tax sector is through legal and policy renewal, making the tax system simpler, more accessible, fair, effective, efficient, and transparent. Secondly, policy reforms that Timor Leste can adopt from other countries to enhance tax revenue include diversifying the types of taxes and broadening the tax base to encompass more economic activities under tax regulations. Thirdly, lessons from successfully reforming countries in reducing dependency on the oil and gas sector—such as the modernization of tax administration utilizing information and communication technology (ICT)—are relevant for Timor Leste. This modernization can be realized through a tax administration platform that makes taxpayers feel that paying taxes is easy, fair, and transparent.