Abstract
Indonesia has come a long way in the last decade to improve its tax system in terms of both revenue generation and administrative efficiency. However, tax revenues are still low at 4,444 due to growing infrastructure spending and the need for social protection. With the exception of the natural resources sector, the best way to increase tax revenues is to expand the tax base and improve tax administration, rather than changing the size of taxes that appear more or less in line with international practice. Possible steps to expand the tax base include accepting more self-employed people in the tax system, targeting employer benefits and benefits, and reducing VAT exemptions. increase. Similarly, broad investment credit is not an ominous way to increase investment incentives over selective tax exemptions. The government plans to promote integration into the tax system in the long run, but the introduction of simplified tax systems to SMEs and SMEs is restricted by the government. Since 2002, tax administration has improved, internal control systems have improved, and administrative decision transparency has improved. New tax audits due to compliance risks in the resource sector, especially in income tax mining, could further improve the management system. This means that Indonesia now has access to international financial markets and a diverse portfolio of resources.
Highlights
According to the revised state budget by Presreg (President Regulation) 72/2020 the spending will Rp 2.732,92 Trilyun (T), whereas the targeted income will only Rp 1.699,9T resulting in a deficit that will be financed by debt of Rp 1.039,2T
As the wealthy individual businessmen (WIB) may gain the lower tax rate from the companies nondeductible fringe benefits, especially in case of making loss companies, the taxation of fringe benefits may increase the role of personal income tax (PIT)
Include: (1) keep continuing the use of joint/family tax return, (2) as to increase the amount of WIB, instead of applying nontransparent system for partnership and the like entities, it would be advisable to apply the transparent one, (3) the use of of Art 22 income tax on the buying for reseling merchandises made by individual traders, (4) integrating of PIT with Corporate Income Tax (CIT), and (5) automatic compliance control applying to trader on B2B transactions by using IT (e-review of at least 50% of commercial/ tax invoices)
Summary
Indonesia has come a long way in the last decade to improve its tax system in terms of both revenue generation and administrative efficiency. With the exception of the natural resources sector, the best way to increase tax revenues is to expand the tax base and improve tax administration, rather than changing the size of taxes that appear more or less in line with international practice. New tax audits due to compliance risks in the resource sector, especially in income tax mining, could further improve the management system. This means that Indonesia has access to international financial markets and a diverse portfolio of resources
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