An Increase in State Revenues Indicates Economic Recovery

KOMPAS/CYPRIANUS ANTO SAPTOWALYONO

Screenshot of Minister of Finance Sri Mulyani Indrawati at a seminar on the network themed Potential Sovereign Wealth Fund (SWF) in Transportation Infrastructure Financing in Indonesia, Wednesday (3/3/2021).

JAKARTA, KOMPAS - The increase in state revenues from various types of taxes in February 2021 has indicated an encouraging sign of economic recovery in the country. However, the economic recovery will still face challenges, especially related to the handling of Covid-19 and the success of the vaccination program.

As of Feb. 28, 2021, state revenue realization reached a total of Rp 219.2 trillion, an increase of 0.7 percent compared to the same period last year. State revenue was mainly supported by the growth in excise revenues and the increase in export duties in line with rising commodity prices.

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Meanwhile, up to the end of February, tax revenue realization reached Rp 146.1 trillion. The figure still contracted 4.8 percent from the previous month, but the fall was lower than 15.3 percent recorded in January.

Finance Minister Sri Mulyani Indrawati said in a virtual press conference on Tuesday that four types of taxes had begun to enter the positive zone at the end of February 2021. They consist of Final Income Tax (PPh Final), which grew 4.48 percent compared to last year, Domestic Value Added Tax (PPN DN), which rose 8.14 percent, Value Added Tax on Imports, which grew 1.14 percent and the withholding tax under Article 26 (PPh 26 Income Tax), which grew 19.47 percent.

So, compared to February last year, from the tax realization from domestic VAT and import VAT, it can be seen that the economy has begun recover.

According to Sri Mulyani, the encouraging growth of the PPN DN tax indicated that this year\'s public consumption had begun to recover, even though the people’s purchasing power was still under pressure due to Covid-19. Meanwhile, import VAT rose in line with the increase in imports of capital goods and consumer goods.

"So, compared to February last year, from the tax realization from domestic VAT and import VAT, it can be seen that the economy has begun recover. The government will control and accelerate the recovery,” she said.

KOMPAS/TOTOK WIJAYANTO

Tax service activities at the Jakarta Kebayoran Baru Primary Tax Office, Tuesday (9/3/2021).

The finance minister said that even though tax revenues were still contracting, they had already indicated a sign of recovery as the fall in February 2021 was lower than that in January 2021. "The lower contraction is also supported by the VAT revenue in February, which jumped 5.2 percent compared to last year," she said.

According to data provided by the Finance Ministry, four types of taxes were still contracting. They include the withholding tax under Article 21 (PPH 21 Income Tax), which contracted 21 percent, the income tax on imports (PPH 22 Income Tax), which shrank 22.14 percent, individual income tax, which contracted 12.51 percent and corporate income tax, which dropped 39.54 percent.

Sri Mulyani said the contraction in the drop in state revenues from PPh 21 Income Tax, PPH 22 Income Tax and corporate income tax occurred due to the provision of tax incentives to support the economic recovery program. This year, the government continues to cover employee taxes, the exemption of the income tax on imports (PPH 22 Income Tax) and a 50 percent discount on income tax under Article 25 (PPh 25 Income Tax)

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The deputy director of the Institute for Development of Economics and Finance (Indef), Eko Listiyanto, said the economic turnaround early this year would not immediately bring economic activity back to the condition before the pandemic. As a result, the pace of growth in tax revenues will remain slow. “The economic improvement depends highly on the handling of Covid-19 and vaccinations. On the other hand, vaccine distribution is still limited," he said.

Eko estimates that the government will revise the tax revenue target. He also suspects that the realization of tax revenue this year will remain low as the government plans to provide tax incentives, such as a cut in the Sales Tax on Luxury Goods (PPnBM) and VAT on property.

Also read: Growth Prospect for 2021

As of February 2021, the state budget deficit was Rp 63.6 trillion. Sri Mulyani said that although it had risen 2.8 percent compared to that in February 2020, the budget deficit at the beginning of this year was only 0.36 percent of gross domestic product, lower than the position in February 2020, which was recorded at 0.4 percent of GDP. According to her, accelerating state spending is needed to support economic recovery and growth.

This article was translated by Hendarsyah Tarmizi.