Tax Becomes Symbol of Mutual Cooperation, Justice

KOMPAS/HERU SRI KUMORO

Finance Minister Sri Mulyani Indrawati .

JAKARTA, KOMPAS — The tax system in Indonesia has become a symbol of mutual cooperation as well as an instrument for achieving social justice. When the economy is sluggish, the government provides tax incentives to support the business world. The government will again push to grow tax revenues for development purposes once the business world has recovered.

"We know that since early 2020 when the Covid-19 pandemic began, the State Budget has become an extraordinarily strategic and important instrument for dealing with the pandemic, protecting the community and restoring the economy," Finance Minister Sri Mulyani Indrawati said at a ceremony held virtually on Wednesday (14/7/2021) to commemorate 2021 Tax Day.

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She said that in order to support business sectors affected by the pandemic, the government had introduced a number of taxes. These include the government’s initiative to cover income tax (PPh 21) payment under Article 21, the exemption of value added tax (VAT) for the property sector, Article 25 on reducing income tax and accelerating VAT refunds, the exemption of luxury goods sales tax (PPnBM) for the automotive sector, and Article 22 on the exemption of Income tax on imports.

However, once the economy begins to recover, these tax incentives will be eliminated gradually. Furthermore, taxes will be increased again to finance the country\'s development programs.

Sri Mulyani emphasized that tax reform was the key to improving state revenue. The government reformed the taxation system in 1983 by changing it from an official assessment system to a self-assessment system, among other measures.

At present, the government and the House of Representatives (DPR) are discussing the next stage of the tax reform plans. "We must continue to strengthen the taxation system and redesign it to adapt to global and domestic changes," Sri Mulyani said.

At the same event, Taxation Director General Suryo Utomo said that since last year, the tax office had been focusing its activities on providing the tax incentives, collecting VAT from trading activities conducted through digital systems, and vertical restructuring.

From April 2020 to June 2021, the tax incentives realized Rp 106.62 trillion. The incentives were given to those business sectors that were affected by the pandemic so they could survive the crisis.

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With the imposition of the emergency public activity restrictions (PPKM Darurat), the Finance Ministry projects that the 2021 tax revenues would reach only Rp 1.18 quadrillion, or 95.7 percent of the originally targeted Rp 1.22 quadrillion in revenues. This means a shortfall of Rp 53.3 trillion in tax revenues. Meanwhile, the 2021 tax revenue is projected to grow 9.7 percent from the previous year.

The article was translated by Hendarsyah Tarmizi).