LPEM UI: Prabowo-Gibran Government Needs To Strengthen Law Enforcement Related To Tax Revenue

Prabowo Subianto. (Photo: Doc. Antara)

JAKARTA - The Institute for Economic and Community Research, Faculty of Economics and Business, University of Indonesia (LPEM FEB UI) assesses that the government of the elected president and vice president Prabowo Subianto and Gibran Rakabuming Raka need to strengthen law enforcement to increase tax revenue.

"If you look at it, there are indeed many cases where law enforcement is still quite weak, so tax collection (tax collection) is also still low, so things like that really need to be strengthened," said LPEM economist FEB UI Teuku Riefky, quoted from Antara, in Jakarta, Friday 18 October.

He stated that in addition to increasing tax collection and revenue, strengthening law enforcement more concretely can also reduce the potential for tax leakage, as stated in the 7th Asta Cita Working Program of the Prabowo-Gibran administration.

One of the missions contained in Asta Cita is governance reform by preventing leakage of state and tax revenues in the fields of natural resources and raw commodities.

Riefky said that increasing state revenue can also be done by absorbing more workers in the formal sector, so as to encourage an increase in tax revenue, especially from Income Taxes.

He said that now most Indonesians are informal workers in the service and trade sectors.

This reduces their potential contribution to taxes, especially in the midst of the current weakening of people's purchasing power.

"Now the purchasing power of the middle class is decreasing, it is certain that the potential for tax contributions will also decrease, and the greater the number of people working in the informal sector as well as the potential for them to contribute to fiscal revenues is also decreasing," he explained.

In addition, Riefky also asked the upcoming government to formulate policies that could increase the productivity of the industrial and manufacturing sectors in order to increase their contribution to state revenues.

He said that imposing more types of taxes on these sectors was not the key to increasing their contribution.

"Even if you want to increase (tax revenue), you really need more consistent and more gradual steps (in stages) not to cause unintended consequences (unintended consequences) in the economy," he said.

Meanwhile, regarding the establishment of the State Revenue Agency, Riefky said that the practice of separating the Ministry of Finance and institutional revenues had been carried out effectively in many countries.

Even so, he highlighted a number of challenges for future governments in carrying out these practices, one of which is preparing for the transition of separation of the two institutions.

"What may also be an issue is the synchronization of fiscals in terms of spending and acceptance, first under one ministry, then separated, now this may need to be considered how to synchronize it later," he added.

The establishment of the new State Revenue Agency and increasing the ratio of state revenues to gross domestic product (GDP) to 23 percent is one of the eight best rapid product programs (quick win) promoted by Prabowo-Gibran.

This is done in order to increase the government's budget to carry out various development programs that have an economic impact.