This target is perhaps quite realistic. However, it is important to note that this tax-to-GDP ratio is still among the lowest in the world.

This ratio should be increased significantly since the tax revenue would be more dominant in contributing to the state revenue in the coming years. This is also very important if we want to reduce our foreign debt.

Sweden is considered one of the countries with the highest tax-to-GDP ratio in the world. According to the 2010 edition of the publication of taxation trends in the European Union, issued by Eurostat, the tax-to-GDP ratio in Sweden in 2008 was 47.1 percent.

The report also found that Sweden had the highest personal income tax rate, which was about 56.4 percent.

For personal income, the tax rate is progressive. The higher the income, the higher the rate is. At the top level, it may even exceed 50 percent of the income. Interestingly, the corporate tax is set comparatively low.

This encourages people to create businesses. With such figures, it is not surprising the individual tax can contribute more than corporate taxes. People also tend to be self-employed rather that being employed.

In addition, this tax structure brings income equality. As a country with many CEOs and entrepreneurs, Sweden (2005) has a Gini coefficient of only 23 percent.

In real life, the gap between the rich and the poor is difficult to see in Sweden. The Gini coefficient is a measure of inequality of distribution. It is generally used as a measure of imbalance of income or wealth.

Surprisingly, the Swedish people live peacefully with such high individual taxes. Even when I asked my colleague, an immigrant from Eastern Europe, about anything special about the Swedes, he said that the Swedish loved being taxed! Swedes believe their money will be returned to them with a better value.

In Sweden, for instance, all education fees, from elementary to university level, are free. The country also provides abundant subsidies for public needs, such as subsidies for unemployed people, pensions for every taxpayer, and free medical services for those under 18 etc.

An article in The Guardian (Nov. 16, 2008) entitled “Where tax goes up to 60 percent, and everybody’s happy paying it”, also addresses a similar experience. According to an interview in the article, most Swedes believe that the state will manage their taxes well.

This public trust is supported by simple tax procedures and transparency on tax allocation. Tax invoices can be received by cell phone. The agency provides a detailed explanation of the allocation of the paid tax to the taxpayers.

For instance, if you pay a 100 kronor (US$13.65) tax, then 43 kronor will be allocated by the state for social security, 14.5 kronor will be for education, 13.1 kronor for health and medical services, 12.4 kronor for public administration etc.

This helps the taxpayers, who are mostly well-educated people, to understand their contribution and encourages public solidarity.

Furthermore, the tax agency publicly reports their investigation of any tax gaps and law enforcement measures taken to discourage tax evaders and bring fairness to the taxpayers.

The agency also intensifies the civil administration to make sure that everyone is officially registered.

In Sweden, every newborn babies and new immigrants with residence status has a tax register number that is integrated with their personal identity (personnummer). Without this number, you will not be entitled to any public subsidy that comes from tax.

Nevertheless, in addition to these tax administration strategies, the local culture is an important factor behind the success of tax implementation in Sweden. This culture views the state as the people’s home where everyone will be protected.

This creates a strong belief among the people that every single contribution to the state is for their own benefit.

Therefore, paying tax is not a burden but a means of solidarity to sustain the prosperity of the country.

Although it may take time, this culture has to be cultivated in Indonesia through trustworthy government officials, efficient and professional public services, well-targeted public subsidies, as well as a well-defined development strategy that puts people as its priority. We also need economic growth that can bring in more people with taxable income.

Without such measures, people in Indonesia will never be happy to share their money through taxation.


The writer is an employee with the Finance Ministry and a PhD candidate at CTH Gothenburg, Sweden. He currently resides in Tokyo as an exchange researcher. The opinions expressed are personal.

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