11 Alternative Taxes Potentially Increase State Revenue by IDR 524 Trillion

JAKARTA - The government is currently seeking ways to increase state revenue to finance various priority programs, such as budget cuts in several ministries and institutions and implementing a consumption tax that tends to be regressive.

However, the Center of Economic and Law Studies (Celios) believes this approach is inappropriate, as the government would be better off focusing on expanding the tax base from alternative sources.

A recent report from Celios, entitled "With Respect, State Officials: Don't Collect Taxes Like Hunting in a Zoo," reveals the potential for state revenue through progressive and equitable tax instruments.

The analogy of "animals in the zoo" refers to taxpayers who have been "caught" by the system.

Meanwhile, "wild animals in the jungle" are those with high incomes, such as billionaires, who have escaped the tax radar.

CELIOS Media's Director of Public Policy, Wahyudi Askar, stated that this strategy is believed to be able to maintain the sustainability of important social programs while closing the fiscal deficit more equitably without burdening vulnerable groups.

According to him, by imposing progressive taxes on large corporations and a handful of super-rich individuals, the potential for additional state revenue could reach IDR 469 to IDR 524 trillion per year.

Furthermore, a CELIOS study revealed that implementing various progressive tax instruments and reviewing poorly targeted tax incentives has the potential to increase state revenue by up to IDR 524 trillion per year.

There are 11 alternative taxes that the government can utilize to better finance social protection programs and have the potential to increase state revenue by up to IDR 524 trillion.

Based on Celios' research, the 11 alternative taxes identified are:

1. Reviewing tax incentives, which has the potential to increase state revenue by simply reviewing and cutting poorly targeted tax incentives by up to IDR 137.4 trillion.

2. Wealth tax, which has the potential to increase state revenue from wealth taxes on just the 50 richest individuals in Indonesia by IDR 81.6 trillion.

3. Carbon tax, which has the potential to increase state revenue by implementing a carbon tax of up to IDR 76.4 trillion.

4. A coal production tax has the potential to increase state revenue from coal mining taxes by IDR 66.5 trillion.

5. A windfall profit tax on the extractive sector has the potential to increase state revenue from the windfall tax on consecutive profit increases due to the commodity price boom by up to IDR 50 trillion.

6. A tax on biodiversity loss has the potential to increase state revenue by IDR 48.6 trillion if biodiversity damage is compensated through a tax scheme.

7. A digital tax has the potential to increase state revenue from large digital companies paying digital taxes by up to IDR 29.5 trillion.

8. An increase in the inheritance tax rate has the potential to increase state revenue by IDR 20 trillion through an inheritance tax increase.

9. A tax on third home ownership has the potential to increase state revenue by up to IDR 4.7 trillion if third home ownership is taxed.

10. Capital gains tax has the potential to increase state revenue by IDR 7 trillion if profits from stocks and financial assets are subject to a higher tax rate.

11. Excise tax on packaged sweetened beverages. An excise tax policy on sugary drinks could support public health while increasing state revenue by IDR 3.9 trillion.

"Those numbers make sense technically, but not politically. So, the only way we can break this deadlock is if people start to understand that there are alternative systems out there," he said at a press conference on Tuesday, August 12.