Government Asked To Expand Tax Base To Increase Potential State Revenue

The atmosphere at the tax office (Photo: Doc. Antara)

JAKARTA - University of Indonesia Research Institute for Economics and Society (LPEM UI) researcher Christine Chen does not deny that the government currently requires large funds to tackle the COVID-19 pandemic.

According to him, the extraordinary situation that has been going on for the past two years is considered to have sucked up a large number of state budget resources. While on the other hand, annual tax revenue never reaches the set target.

"To increase state revenue from taxes, the government needs to expand the tax base (types of goods and services subject to tax), tax ratio, and increase VAT (value added tax) from 10 percent to 12 percent," he said in a written statement quoted on Tuesday, August 10.

In Christine's notes, all three have been included in the proposed Fifth Amendment to the Amendment Law No. 6 of 1983 concerning General Provisions and Tax Procedures (RUU Taxation) which is being discussed with the House of Representatives of the Republic of Indonesia (DPR RI).

“The new Taxation Bill, (made) to accommodate taxation both at home and abroad. Improvements to the Tax Law are not only happening in Indonesia but also internationally,” he said.

Christine Chen gave an example, the government's proposed VAT increase of 12 percent from the current 10 percent. The proposal to increase VAT is not only made by the Indonesian government. Other countries that are members of the OECD (Organization for Economic Cooperation and Development), even increased VAT by 15 percent.

“Thus, the planned increase in domestic VAT is 12 percent, it is still below the international VAT increase which averages 15.4 percent, said Christine Chen.

Quoting the Ministry of Finance broadcast, the current tax ratio is in the range of 8.18 percent. The government is said to continue to make strategic efforts to increase the tax ratio to 8.37 percent to 8.42 percent in 2022.

Meanwhile, in the 2021 APBN, tax revenue is targeted at Rp. 1,229.6 trillion or 14.7 percent higher than the realization of revenue for the 2020 period.

In detail, PPh is targeted at Rp638 trillion or 15.1 percent higher than the previous year's realization, and VAT and PPnBM are targeted at Rp518.5 trillion or 15.1 percent higher.

Meanwhile, the 2021 State Budget deficit is believed to reach IDR 1,006,4 trillion or equivalent to 5.7 percent of gross domestic product (GDP).