Officials pack tax return forms (SPT) PPh for Individuals that have been reported by taxpayers at the Jakarta Tax Office, Kemayoran, on the last day of annual individual SPT submission day for the 2016 period, Friday (21/4). The rise in the number of individual taxpayers submitting their SPT online reduces the SPT submission queue at the tax office. The SPT submission period for institutional taxpayers will end on April 30.
JAKARTA, KOMPAS — Taxation as an instrument of the fiscal policy has not been optimally used by the government to reduce income inequality. In fact, the unjust taxation has partly contributed to widening income inequality.
That was one of the issues raised during the Indonesia Development Forum (IDF), which was held in Jakarta on Aug. 9-10. The event, held by the National Development Planning Agency (Bappenas) in cooperation with the Australian Department of Foreign Affairs and Trade was themed "Fighting Inequality for Better Growth".
On the first day of IDF on Wednesday, a number of speakers talked about taxes as a strategic instrument to reduce poverty and income inequality. On the second day, on Thursday, the tax issues were raised more specifically in the session entitled “Affirmative Policy on Fiscal and Investment to Reduce Income Inequality".
The executive director of the Center for Indonesia Taxation Analysis (CITA), Yustinus Prastowo, as one of the speakers at the IDF, said Thursday, the taxation system in Indonesia was still deemed unfair and had contributed to income inequality.
"Or at least not yet optimally used as an instrument that can reduce inequality," he said. There was an unfair taxation system, according to Prastowo, because policies and the administration were unable to fully tap the tax potential in the richest group of the people. As a result, the richest group only paid part of the total taxes they had to pay.
"Tax is the most effective means of wealth redistribution. Because, in addition to the constitutional mandate, the tax is also based on the principle of the ability to pay. However, this has not been fully implemented in Indonesia," Prastowo said.
The structure of tax revenues in the member states of the Organization for Economic Cooperation and Development (OECD) shows, the largest contributor to state revenue is the income tax of individuals, followed by Value Added Tax (VAT) and corporate income tax. This model is considered ideal.
In Indonesia, the structure is unjust. The individual income tax is the lowest, mostly from the income tax of the employees, which last year reached Rp 110 trillion. While non-employee income tax, including employers, only contributed about Rp 10 trillion. The largest contributors are corporate income tax and VAT.
VAT is a regressive tax. Everyone who buys goods is subject to VAT payment and bears the same tax burden.
Indonesia has recorded a reduction in the number of poor people from year to year. However, since 2007 until now, the pace of the reduction of the number of poor people slowed down. While income inequality widened over the past decade.
The reduction of the number of poor people in 2005-2010 averaged 816,000 people per year. In 2010-2015, the reduction was only 486,000 people per year or nearly half of the figure in the 2005-2010 period. This trend continued in 2016 and this year. The number of poor people in Indonesia as of March 2017 reached a total of 27.77 million people or 10.64 percent of the total population.
While the expenditure gap as an approach to income inequality widened. The Gini ratio, as an indicator of inequality, ranged from 0.35 to 0.38 in 2007-2011 although it touched its lowest level of 0.41 in March 2011. In 2012-2015, the Gini ratio was fluctuating at about 0.4. As of March 2016, it fell to 0.397, then to 0.394 as of September 2016. As of March 2017, the Gini ratio was 0.393.
Not yet obedient
National Development Planning Minister Bambang Brodjonegoro, in a special interview with Kompas, on Thursday , said one of the causes of the income inequality was due to the fact that the large taxpayer groups had not fully fulfilled their tax obligation. It can be seen from the low amount of the tax receipts from non-employee individual income tax.
"In my opinion, in order to quickly reduce inequality, the individual income tax should be further strengthened. The pattern should be shifted. The largest contributor should be changed from corporations to individuals," Bambang added.
On the first day of the IDF, the chargé d\'affaires of the Australian Embassy to Indonesia, Bradley Armstrong, said that the Australian government implemented a progressive tax system, in which the tax payment is based on as a person\'s income level.
The implication is that 20 percent of Australia\'s population with highest income contributes 70 percent of total tax revenues.
Meanwhile, according to the director of tax compliance and tax receipts of the directorate general of taxation, Yon Arsal, said that the realization of tax revenue as of July 31 had reached Rp 601.1 trillion or 46.8 percent of the target stated in the 2017 revised state budget. It had risen 12.4 percent from the tax revenues in the same period last year.
