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Invest in people, technology to increase tax revenue
The type of tax office in and of itself does not guarantee more revenue, but a higher number of staff available to serve and supervise taxpayers can.
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Pay your due: Palembang Ilir Barat Tax Office employees serve taxpayers submitting their annual tax returns on Feb. 29, 2024. The South Sumatra and Bangka Belitung office of the Directorate General of Taxation has already received 117,281 tax returns from individual taxpayers. (Antara/Nova Wahyudi )
O
ur tax system has been underperforming for many years as it does not collect as much as it should. Since the turn of the new millennium, not once have we been able to achieve a 15 percent tax ratio, which is considered the minimum level of tax collection to maintain sustainable economic growth.
In fact, Indonesia consistently ranks near the bottom in regional and global comparisons of the so-called tax ratio, or tax revenues as a percentage of gross domestic product (GDP).
Like many problems in life, the tax question is complex and multifaceted, but there are hints to the solutions and some of the probable answers are so simple that they are sometimes overlooked.
Why is our tax system languishing? Because we, as a society, fail to invest sufficient resources into improving it. First, the number of staff working in the tax administration is too little. And secondly, the operating budget is too low.
If you look at the Organisation of Economic Co-operation and Development (OECD) Tax Administration 2023 report, and do a simple analysis, you will quickly see a relationship between the number of staff working in a tax administration and the amount of revenue that it collects. The higher the number of staff, the higher the revenue.
In countries with a tax ratio lower than 14 percent, one tax officer is employed for every 2,000 taxpayers. In countries with a tax ratio between 15 and 20 percent, there is one taxman for every 1,500 taxpayers. And if a country has one tax officer for every 680 taxpayers, then, statistically speaking, that country is in the big league: its tax ratio is more than 20 percent. The trend is clear: the more tax officers there are, the higher the revenue collection.
Okay, so how many taxpayers for every tax officer do we have in Indonesia? The answer is 3,037. This partly explains why our tax-to-GDP ratio is so low at around 10 percent. If we compare our situation with that of Australia, a country with a tax ratio of 21 percent, a rather sobering view emerges.
