TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Tax burdens likely to slow Indonesian economy
Worried: Economist Raden Pardede warns that high taxes can cost businesses more, which will lead to a drop in government revenues and a slowing of economic production
Change text size
Gift Premium Articles
to Anyone
Share the best of The Jakarta Post with friends, family, or colleagues. As a subscriber, you can gift 3 to 5 articles each month that anyone can read—no subscription needed!
W
span class="caption">Worried: Economist Raden Pardede warns that high taxes can cost businesses more, which will lead to a drop in government revenues and a slowing of economic production.(Tempo)
An economist has warned that improper tax policies, such as applying a higher tax amid a weak economy, may slow the Indonesian economy.
"When Indonesia's oil and gas exports are not working, tax is the way to boost the country's revenues. However, imposing a higher tax amid a weak economy will make the tax become an economic burden on the country," Creco Consulting economist Raden Pardede said on Tuesday.
He was speaking in response to tax problems Indonesia was currently facing, such as the government's unrealistic tax revenue target, a prepaid tax scheme, which had made foreign investors afraid of Indonesia, and the ongoing tax reforms, which were being conducted without proper administration improvements.
The unrealistic tax target, for example, has reportedly caused a budget deficit at the end of this year. As December is coming to an end, Indonesia's tax revenues at the end of this year are expected to reach only 85 percent of the total tax revenues targeted.
Based on World Bank data, Indonesia's tax revenues decreased by 1.2 percent in the third quarter year-on-year. However, there were declines in non-tax revenues as well, such as the revenues from oil and gas shares to the government, which decreased by 10.7 percent compared to in the third quarter last year. This has forced the government to set an ambitious tax target, which will hopefully allow it to finance the country's developments.
In the 2016 budget year, the government has targeted to raise more tax revenues, totalling Rp 1.82 quadrillion (US$129.5 billion), 14.3 percent of the GDP, up by 13.1 percent from 2015.
Pardede said that the state budget must be revised as soon as possible and the government must focus to ensure the effectiveness of the budget implementation.
Some taxes rules have become obstacles for foreign investors to enter Indonesia, an analyst said. American Chamber of Commerce in Indonesia (AmCham) economist A. Lin Neumann said that companies were subjected to several taxes, including prepaid taxes, they must first pay before they were allowed to start their businesses in Indonesia. Foreign companies were apprehensive about the government's plan to increase its tax targets because they feel they will be the target of higher tax collection.
Pardede praised the government's ongoing tax reform and tax amnesty programs, saying that they could increase Indonesia's tax base because the taxpayer data would be enhanced. However, poor administration would hamper the tax reform programs, as Indonesia is still lacking proper administration skills and many of its tax office staff members are insufficiently trained. Even if new data could be gathered from the tax amnesty program, it will be easily scattered, just like before.
"The Tax Office is just 'hunting in the zoo'. They want to collect high tax revenues, but they want to do it in the easiest way without having to make heavy efforts to find a new tax base and without having to make a proper improvement in their administration," Pardede said. (ebf)(+)
