Indonesia's Tax Ratio Is Low, This Is Sri Mulyani's Staff Explanation

JAKARTA - Expert Staff to the Minister of Finance for Tax Compliance Yon Arsal explained that the government has been using a narrow definition in calculating the tax ratio, so that the figures displayed appear lower than the existing real potential.

He said that the current calculation method only includes receipts from the Directorate General of Taxes (DJP) and the Directorate General of Customs and Excise (DJBC), which are then compared to Gross Domestic Product (GDP).

According to Yon, in order to obtain a more comprehensive tax ratio, there are at least four elements that need to be included, namely tax revenue, non-tax state revenue (PNBP) from natural resources (SDA), regional taxes, and social security contributions.

"So, these four components must at least be in the calculation of a tax ratio. So if we often compare our tax ratio with abroad, then only compare only the acceptance of DGT and DJBC, it feels incomplete," said Yon at the Celios discussion event, Tuesday, August 12.

Yon added that the decline in the tax ratio in recent years does not automatically reflect the weakness of tax performance.

According to him, there are several types of taxes that were previously managed by the central government, such as the Obtainment of Land and Building Rights (BPHTB) and Land and Building Taxes (PBB) which have been transferred to the regions, so that they are no longer recorded in central revenues.

"This means that the tax ratio is no longer included. So our tax ratio sometimes shrinks not because he is small, but because there are several types of taxes which are then allocated to the regions, become part of the region," he said.

"We see that taxes for entertainment, BPJB yes, certain goods and types, hotels and so on are taxes. But because he has been taxed in the regions, we no longer want taxes at the center. He should have become a VAT, but no more because he can't, there was no double taxation. Well, actually, we also have to withdraw this if we want to calculate the tax ratio comprehensively, if we want to play comprehensively," he added.

Yon emphasized that actually Indonesia's tax ratio (tax ratio) has the potential to reach 13 percent.

"So actually our tax ratio, if you want to be comparative, is still relatively around 13 percent to 13.5 percent," he said.

However, Yon admits that Indonesia still has a large enough difference to achieve the ideal tax ratio target of 15 percent of GDP.

He added that when compared to neighboring countries, Indonesia's position was not too left behind, like Malaysia had a tax ratio of around 12'13 percent, while Vietnam, which looked higher (17'18 percent), turned out to be around 5.4 percent from social security fees.