Economist Says MSME Tax Abolition Is Right

Illustration of SMEs (Photo: Antara)

JAKARTA - Economic observer of the Alkhairaat Executive Board (PB), Central Sulawesi, Sofyan Bachmid assessed that the Indonesian government's move to abolish taxes for MSMEs with incomes below IDR 500 million through the ratification of the Income Tax Law (PPh) is the right step.

"Even though it has been done in several countries in Southeast Asia, such as Singapore and Thailand, and even though we have just done it, I think it is very appropriate to abolish it from 0.5 percent to 0 percent," Sofyan said in Palu, as reported by Antara.

The decision that has been taken by the Ministry of Finance, according to him, is a form of justice in the tax system to the public, as well as providing a stimulus for MSMEs to develop their businesses.

Since the pandemic, he said, the number of MSMEs in the country has increased significantly. According to the Ministry of Cooperatives and MSMEs, as of July 2021, the total number of MSMEs based in Jakarta is 13.7 million out of a total of 64 million which are widely spread throughout Indonesia.

"Referring to this, from the tax aspect of the Ministry of Finance report that I got, the contribution of MSMEs is still quite large, up to 60 percent, not to mention the absorption of its workforce," said Sofyan.

He stated that one of the functions of the tax is to distribute, allocate, and stabilize the economy. Therefore, he suggested that it is also important to consider reducing the Value Added Tax (VAT) which is currently still at a value of 10 percent.

"This is interesting and has also been done by other countries to support the growth of MSMEs, the benefits can increase people's purchasing power because it will certainly correlate with prices and services if it is done especially during a pandemic like this it will definitely increase the purchasing power of our people," Sofyan said.

One of the advantages that Indonesia has, he said, in terms of potential competition is as a country that produces goods and services at low costs, but is not yet very competitive.

"It must be a serious concern for the government to encourage superior products comparatively and competitively, and must be pushed quickly so that our economy grows faster," he said.

He suggested that for the Central Sulawesi scale, the local government concretely provides an understanding of the tax aspect to MSME actors, who earn above or below IDR 500 million.