The Unfinished Business with Tax



Laila Afifa

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  • TEMPO.CO, JakartaThe government passed its proposal to revise the General Taxation System Law on to the House of Representatives. This does not solve the problem.

    The government should reevaluate the tax administration system rather than insisting on proposing the revised General Provisions of Taxation Procedures (KUP) Law to the House of Representatives (DPR). Given the fact that there are no signs of improvement in the economy, new tax levies will only weaken it. In the draft of the revised KUP Law that began to be circulated in public at the end of May, one article provides for the imposition of value added tax on basic necessitied and the taxing of the education sector. This provision is strange as it appears at a time when the economy is in a poor state because of the Covid-19 pandemic. The government has been slow to explain the reason for this proposed change. Finance Minister Sri Mulyani has said that the government will only explain the thinking behind the revised law in a joint meeting with the DPR, but it is not certain when this will happen.

    The government obviously needs new revenue. The handling of the pandemic requires large funds. Spending on the Covid-19 vaccination and mitigation has already cost hundreds of trillions of rupiah. Government debt as of the end of April was Rp6,527 trillion or around Rp82 trillion higher than the previous month. It is predicted this debt will increase in line with the high government spending requirement to cover the costs of infrastructure projects.

    Looking for new sources of revenue by imposing new taxes on the public is not a wise choice. If it is forced through, the implementation will lead to a new crisis for the people. Meanwhile, economic growth is still negative, and has been for the last three quarters.

    In this difficult economic time, the government should tighten its belt. Spending should only be on priority sectors, such as health and education.

    The government has admitted that 'leaks' of tax revenue are the result of policies and an administration system, that still need to be improved. This is why the plan to increase revenues from new sectors will remain nothing more than a fantasy if there are still leaks everywhere.

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