Encouraging Fiscal Justice, Celios Proposes Progressive Taxes For Big Corporations And Rich People

Tax (Photo: dock. Unsplash)

JAKARTA The Center of Economic and Law Studies (Celios) released a report entitled "With Respect, State Officials: Don't Withdraw Taxes Like Hunting in Zoos" which reveals the potential for state revenue through progressive and fair tax instruments.

The analogy of animals in zoos' refers to taxpayers who have been 'captured' by the system, while Wild animals in the forest are those who earn high, trillioner, but escape the tax radar.

Director of Public Policy Celios, Media Wahyudi Askar said by imposing progressive taxes on large corporations and a handful of super rich people, the potential for additional state revenue could reach Rp469 to Rp524 trillion per year.

In addition, based on a study conducted by CelIOS, it was revealed that the application of various progressive tax instruments and a review of ill-targeted tax incentives has the potential to increase state revenues of up to IDR 524 trillion per year.

He explained that various progressive tax policies have the potential to increase state revenues to hundreds of trillions of rupiah per year, including through a review of ill-targeted tax incentives of Rp. 137.4 trillion, wealth taxes on 50 richest people worth Rp. 81.6 trillion, carbon taxes of Rp. 76.4 trillion, coal production tax of Rp. 66.5 trillion, windfall profit tax for the extractive sector of Rp. 50 trillion, and taxes on the loss of biodiversity of Rp. 48.6 trillion.

Next additional revenues can also be obtained from digital taxes of Rp29.5 trillion, an increase in inheritance tax rates of Rp20 trillion, third home ownership tax of Rp4.7 trillion, capital gain tax of Rp7 trillion, and excise on sweetened drinks in packaging of Rp3.9 trillion which also supports public health.

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

According to him, there are alternative ways to collect taxes, and actually Indonesia is not facing a budget crisis.

However, he said that currently his discussion was stopped in terms of budget cuts, which could also hit the local government's economy because many efficiency items were not on target.

According to him, there is a much more strategic way, namely improving the tax system to be fair and progressive so that it can increase state revenue without sacrificing the foundations of the future, while at the same time making our economy stronger.

"We often talk about how much aid for the poor is, but rarely discuss how the state directly and indirectly provides 'companies allowances' to rich corporations through tax loopholes. This study reveals that if we close that gap and organize tax rates progressively, we will not only increase revenue, but also be able to drive the community's economy. What the public needs to realize is that we don't lack money, we only lack political will to improve our tax system," he said.

CelIOS researcher Jaya Darmawan said that encouraging state revenue through alternative sources does not only have the potential to significantly increase state revenue, but can also strengthen the aspect of fiscal justice that has been of public concern.

He added, in the context of environmental damage that has a high negative externality impact, there is a tax instrument on the loss of biodiversity (biodiversity loss tax) which can not only help reduce the rate of damage, but also have the potential to increase state revenues of up to IDR 48.6 trillion.

"Progressive taxes in the environmental sector can also reduce economic inequality produced through extractive activities dominated by super-rich people, of which 56 percent of the wealth of the 50 richest people in Indonesia comes from the extractive sector," he said.

CelIOS researcher, Galau D. Muhammad, emphasized that the technical approach is very possible to address the problem of double taxation in the application of alternative progressive taxes. However, the main challenge now is the political courage to design a fairer tax system.

"Initial points can be started by reviewing tax incentives that have been given to large corporations. Efforts to shift tax incentives that do not have a significant impact on economic growth and job creation will effectively close the budget leak to reach Rp137.4 trillion," he explained.

The study confirmed that tax reform could no longer be postponed, CelIOS encouraged the government, parliament, and all elements of society to make progressive taxes a national priority agenda.

In addition, CelIOS assesses that currently it is not just observing, but also actively overseeing the direction of this reform so that it is in line with the principles of social justice and a sustainable vision of development.

On the other hand, tax reform will only mean if it is accompanied by comprehensive transparency, data infrastructure improvement, and strengthening tax institutional capacity, because without progressive steps to change course, the state will always lose momentum to realize a real justice order for everyone.