Indonesian Tax Construction in 2019

After completing the task of securing tax revenues in 2018, finally the Directorate General of Taxes (DGT) of the Ministry of Finance can obtain revenues of Rp. 1,315.9 trillion or the achievement of 92.4% of the planned Rp. 1,424 trillion.

It was encouraging because the achievement of the realization of revenues in 2018 was the highest in the last five years. The previous achievements were respectively 91.9% in 2014, then 82% (2015), 81.6% (2016), and 89.7% (2017).

If we pay close attention to tax management during 2018 it feels very dynamic, especially in relation to the continuation of tax amnesty with Law No. 11/2016 and access to financial information for tax purposes in the context of Automatic Exchange of Information (AEoI) with Law No. 9 / 2017.

A sense of dynamic concerns various fundamental elements in tax management, both in terms of regulation, database, organization, human resources, business processes, and information systems, and others. The goal is that Indonesian taxes are felt as a common property of all communities – especially the tax stakeholders – as is the nature of the tax itself.

Now, we have entered 2019 with new challenges especially in the field of taxation. Based on Law No. 12/2018 on the State Budget (APBN) for the 2019 budget year, a tax revenue plan planned to be managed by DGT is set at Rp 1,577.6 trillion. The basic macroeconomic assumptions used as the basis for the calculation are in accordance with the agreement between the Government and the House of Representatives (DPR), namely 5.3% economic growth, 3.5% inflation, IDR 15,000 per US dollar exchange rate, 5 SPN interest rates, 3%, oil price of US $ 70 per barrel, oil lifting 775 thousand barrels per day, and gas lifting 1,250 thousand barrels of oil equivalent per day.

So if compared with the plan when submitting the 2019 RAPBN to the DPR (in August 2018) to be discussed at IDR 1,572 trillion, there would be an increase of IDR 5.6 trillion or 0.36%. Then with the planned amount of Rp. 1,577.6 trillion, qualitatively it would grow 19.9% ​​from the realization of 2018.

When looking at data on growth in revenue realization over the last four years, in 2015, it grew 7.68%, then 4.26% (2016), 4.07% (2017), and 14.33% (2018) which showed pendulum the growth has swung upwards, and referring to the dynamic condition of tax management in 2018, the 2019 tax revenue plan is optimistic that it can be achieved.

Not to mention the tax expenditure policy in the Indonesian budget system that began to be implemented as revenue in 2019. For information, that in 2016 the amount of tax expenditure was Rp. 143.6 trillion and in 2017 amounted to Rp. 154.7 trillion. But there are other conditions that are not less important, namely optimal support from all parties outside the DGT as tax stakeholders, especially the agencies and institutions as users of tax funds sourced from the APBN and APBD funds in supporting their activities.

Tax Construction

How is the construction of Indonesian tax revenue in 2019? This question certainly appeals to various parties, both by the community and the business world, especially the policy makers in the country. Because theoretically, from the construction of taxes in one year planned to be able to know various things, such as the direction of tax policy and the economy, national economic conditions, welfare of society, and others.

Based on Article 4 of Law No. 12/2018, the planned tax receipt of 2019 which amounts to Rp 1,577.6 trillion when compared with state revenues of Rp 2,165.1 trillion, the contribution is 72.9%. Whereas when compared to tax revenues (which are managed by DGT with the Directorate General of Customs and Excise / DGCE) amounting to Rp. 1,786.4 trillion, the contribution is 88.3%.

The planned tax revenue of Rp 1,577.6 trillion will be obtained from the type of Income Tax (PPh) of Rp 894.4 trillion or its role of 56.7%. Then from the type of Value Added Tax (VAT) of Rp 655.4 trillion or 41.5%, Land and Building Tax (PBB) worth Rp 19.1 trillion or 1.2%, and from other taxes Rp 8.6 trillion or 0.5%.

The planned income tax revenue of Rp 894.4 trillion will then be obtained from non-oil and gas PPh of Rp 828.2 trillion or 92.6%, and oil and gas PPh Rp 66.2 trillion or 7.4%. Furthermore, non-oil and gas PPh will be obtained from private non-oil / gas PPh of IDR 387.6 trillion or 46.8% and non-oil and gas PPh of IDR 440.6 trillion or 53.2%. Another thing to note is that in the PPh revenue plan, the amount of IDR 894.4 trillion includes PPh borne by the Government (PPH DTP).

The details of the DTP PPh consist of; a) geothermal commodities amounting to Rp 1.9 trillion, b) interest, yields, and third party income for services provided to the Government in issuing and / or repurchasing / exchanging SBN on the international market, but not including local legal consulting services , in the amount of Rp. 8.9 trillion, c) income from the abolition of non-principal state receivables originating from the Provision of Loans, Investment Fund Accounts and Regional Development Accounts received by Regional Drinking Water Companies amounting to Rp. 8.4 billion, and d) payments Recurrent Cost SPAN financed by pure rupiah of Rp. 472.7 million.

While the planned VAT receipt of Rp 655.4 trillion will be obtained from domestic VAT Rp 410.7 trillion or 62.6%, import VAT Rp 223.3 trillion or 34.1%, and other VAT Rp 21.4 trillion or 3 , 3%. The increase in VAT in 2019 was supported by the government’s efforts to encourage household consumption.

Towards Advanced Countries

From the data on the progress of the realization of revenues so far and the planned tax revenue in 2019, there are interesting things when viewed from the theoretical side of the public economy. Some public economists – including Glenn P. Jenkins – stated that the comparison of contributions or roles between direct taxes and indirect taxes in a country will be known to indicate the level of progress of the country. That is whether it is included as a backward country, developing country, or has become a developed country.

In general it is stated in the public economic approach that, first, if in a country the tax revenue from the community (including the company) is more direct tax than indirect tax, it is indicated that the country has been categorized as a developed country.

Second, if the revenue between direct tax and indirect tax is somewhat balanced, it is indicated that the country is in the category of developing countries. Whereas the third, if direct tax revenues are lower than indirect taxes, it is indicated that the country is in the category of underdeveloped countries.

When it is associated with the administration of Indonesian taxation, namely taxes managed by the DGT and DGCE, the types of direct taxes consist of income tax, and the United Nations. Then indirect taxes consist of VAT, other taxes, excise, import duties, and export duties.

Taking data on tax revenue realization that is the basis of calculations for the last twelve years (2008 to 2019) shows that in general the direct tax contribution is greater than indirect tax. Only three years are the opposite, namely in 2013, 2014, and 2017. The biggest difference in comparison is 56.2% direct tax and 43.8% indirect tax in 2009. While the smallest difference is 50.9% and 49.1 % in 2015.

From the data above, it shows that Indonesia is actually economically starting to have an indication of moving from developing countries to developed countries. Because direct tax revenues tend to be greater than indirect taxes.

This direct tax is received from income earned by the community, both from the results of work – work for the individual and the results of the business of the company – as well as from assets owned that provide income. Assets can be in the form of fixed assets (such as property, etc.), as well as current assets in the form of securities on the money market.

If someday future direct tax revenues can reach at least 60% of total tax revenue (meaning 40% indirect tax contribution), then that is when Indonesia can be included in the category as a developed country. Hopefully this will be achieved as a manifestation of the more prosperous people of Indonesia.

Liberti Pandiangan, Head of Division P2Humas, Jakarta DGT Regional Office

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