Center

Center for
for Indonesia
Indonesia
Taxation
Taxation Analysis
Analysis
 Tax Policies in Reducing Income Gap

Center
Center for
for Indonesia
Indonesia
Taxation
Taxation Analysis
Analysis
Affirmative Fiscal Policy and Investment to Reduce
Income Inequality: “Tax Policies in Reducing Income Gap”

Yustinus Prastowo Indonesia Development Forum 2017

Executive Director of Center for Indonesia Taxation Analysis Fighting Inequality for Better Growth
Center
Center for
for Indonesia
Indonesia
Taxation Analysis Jakarta, 10 August 2017
Taxation Analysis
Jakarta, 9-10 August3 2017
Indonesia Existing Condition
Tax Revenue (of GDP) , State Expenditure (of GDP), Gini Ratio 2000-2016 The Structure of Tax Revenue 2006-2016
Tax Revenue of GDP State Expenditure of GDP Gini Ratio
1105.81
1060

985
0.41 0.41 0.413 0.406 0.408
0.397 921
0.378
0.363 0.364 0.368 0.368 IDR Billion 836

0.33 0.329 0.33 743

0.32 0.32

Gini ratio is influenced by the economic dynamics that occur: Period of commodity Boom 628
(2004 - 2012) is predicted to contribute to the increment of Gini ratio…. 571
545

0.21 425
0.20 412.27
0.19 0.19 383
0.19 0.18 0.18 358 362.9 359.7
0.18 0.17 0.17 336
0.17 0.17
0.16 0.16 0.16 309
0.15 0.15
262
209 193 191
0.11 0.11 0.11 166 172.011
0.10 0.10 0.11 154 151 154.6
0.10 0.10 0.09 0.09 0.10 0.10 0.09 0.09 123 131 129.8
0.09 0.09 106
120
105 109.153
89 90 100
80
0.07 65 51 52 55 62
31 39
2 2 4 3 4 4 4 4 4.3 6 5.275

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Tax Revenue PPh 21 PPh 25/29 OP PPh 25/29 Badan PPN/PPnBm
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

The decrease of Gini ratio as a result of a reduction in a proportion Tax Injustice: Tax Revenue still rely on VAT (indirect tax). Corporate Income
per capita consumption in the top decile. Meanwhile, middle and Tax stagnant, Personal Income Tax Art 21 increases, Non-Employee Personal
Center
Center for
for Indonesia
Indonesia lower group began to increase… Income Tax stagnant
4
Taxation
Taxation Analysis
Analysis Source: DGT, processed by CITA
Type of Assets Mostly Declared
Based on Assets Declaration Letters
The composition of Asset Declaration
Cash/ Cash
Equivalents was dominated by cash / cash
equivalents and marketable
Investment &
Bonds securities.
It means that most of the assets has
Land, Property & other
Immovable Property already been subjected to Final
Acc Receivable & Income Tax, but has not been
Inventory
Gold, Diamond, & other reported yet. Keep in mind, this type
Movable Assets
of assets will not guarantee some
Vehicles additional significant potential in the
Good Will & Other
Intangible Assets
future.

Source: DGT Tax Amnesty Press Release, MoF

IDR, Trillion

OFFSHORE ASSETS
Top 5 Countries-Assets mostly come from DECLARED
REPATRIATION FUND

A lot of Offshore declaration has shown the distrust of

taxpayer to invest their money in Indonesia.

Center
Center for
for Indonesia
Indonesia
Taxation
Taxation Analysis
Analysis
The Deposit Insurance Agency (LPS) Data
Period Feb 2017
% Bank Account to % Bank Account to Bank Accounts (Savings) in the range of
Cash Declared Total Bank Account
Total Bank Account Total Cash Declared amount IDR 1 Billion or above has been
up to 200 million 199.849.842 98,86% 19,53% representing 64,22% of the total assets
200 million to 1 billion 1.814.174 0,90% 16,25% declared, that owned by only 496.867
> 1 billion 496.867 0,25% 64,22%
bank accounts.
T otal 202.160.883 100% 100%

Tax Amnesty Statistics (Assets Declared)

Total Participant Assets Declared
Cash/ Cash Equivalent
% Participant to Cash Declared % Cash Declared to Cash declared in the range of amount
Declared (Range) Participant
Total Participant (Trillion) Total Cash Declared IDR 1 Billion or Above has been
< 200 million 248.689 Taxpayer 32,18% IDR10 0,59% representing 95,5% of the total cash
200 million to < 1 billion 232.874 Taxpayer 30,13% IDR69 3,95% declared on tax amnesty program,
>= 1 billion 291.331 Taxpayer 37,69% IDR1661 95,50% that owned by 291.331 participants
Participants 772.894 Taxpayer 100% only.
Total Cash Declared IDR1739 100,00%

Source: DGT Tax Amnesty Press Release, MoF

Center
Center for
for Indonesia
Indonesia 6
Taxation
Taxation Analysis
Analysis
Inequality and Redistribution Function Analysis
Increment of Tax Revenue is in line with state expenditure but Gini coefficients also continues to
increase

The function of the tax redistribution has not gone well in Indonesia

Based on tax revenue composition, Tax Revenue in Indonesia has not progressive yet

Accessibility of top 1% income for performing Tax Avoidance is widely open

Based on the result of Tax Amnesty Program, top 1% income is the largest group that declares the asset

Center
Center for
for Indonesia
Indonesia 7
Taxation
Taxation Analysis
Analysis
Inequality and Redistribution Function Analysis
The Change of Gini Coefficient Levels as an Impact of Redistribution
Income Inequality in OECD Countries, 1980-2000 Chile 0.47 0.5
Income Inequality: OECD Countries, 1980–2000 Mexico 0.46 0.48
United States 0.39 0.51
Ra ti o of pos t-ta x i ncomes a t Turkey 0.39 0.42
Israel 0.37 0.45
10% from top of the Estonia 0.36 0.51
UK 0.36 0.53
di s tri buti on to i ncomes 10% Lithuania 0.36 0.51
Latvia 0.35 0.5
from bottom c.1980 c.2001 Spain 0.35 0.53
Greece 0.35 0.57
Portugal 0.34 0.56
France 3,5 3,4 Australia 0.34 0.48
New Zealand 0.34 0.46
Germany 3,1 3,3 Japan
Italy
0.33
0.33
0.49
0.52
Canada 0.32 0.44
Japan 2,8 2,7 Ireland 0.31 0.58
South Korea 0.30 0.34
Sweden 2,4 3 Poland
Switzerland
0.30
0.30
0.47
0.39
France 0.29 0.5
United Kingdom 3,5 4,6 Germany 0.29 0.51
Hungary 0.29 0.46
United States 4,7 5,4 Netherlands
Luxembourg
0.28
0.28
0.44
0.48
Sweden 0.28 0.44
OECD mean 3,4 3,7 Austria 0.28 0.5
Slovakia 0.27 0.43
OECD std. dev. 0,8 0,8 Belgium
Czech Rep.
0.27
0.26
0.49
0.46
Finland 0.26 0.5
North Europe 2,9 3,1 Slovenia 0.26 0.47
Denmark 0.25 0.44
Liberal Economies 3,9 4,5 Norway
Iceland
0.25
0.24
0.41
0.39
Source: Luxemburg Income Survey` 0.00 0.20 0.40 0.60 0.80 1.00 1.20
Center
Center for
for Indonesia
Indonesia Gini Ratio after redistribution Gini Ratio Before Redistribution
Taxation
Taxation Analysis
Analysis Source: OECD, quoted from Roser and (Ortiz-Ospina)
Recommendations
Inheritance Tax
1 Taxing the Top (1%)
Financial Transaction Tax (FTT)
Raising the Top Income Tax rate:
Formulating the Most Effective Individual Inc. Tax - Layer Tariff
Marginal tax rate in Indonesia, South Africa, Brazil, and UK 2014
50% 2 Increasing Personal Exemption
Consideration:
45%

40%
Recommendations .: Basic Physical Life
35% for the Next Tax .: District’s Personal Exemption Scheme
Reform : .: Gender Aspects in Taxation
30%
.: Credit for the Elderly or the Disabled
TAX RATE

25%
Adding more
Layer on Tax
20%
Bracket - from 3 AEOI & BEPS
15%
4 to 6 in order
10%
to reduce
.: Taxing Digitial Economy
5% inequality.
.: TP Documentations & CbC Report
0%
0 2 4 6 8 10 12 14 .: GAAR, SAAR
ANNUAL INCOME DIVIDED BY GDP PER CAPITA
South Africa Indonesia Brazil United Kingdom
4 Pigouvian Tax
Personal income tax system in Indonesia and South Africa do not show progressivity. It is proved by
relatively low marginal rate and relatively high income level that subject to the highest rate. .: tax levied on any market activity that generates negative externalities
Center
Center for
for Indonesia
Indonesia .: being set equal to the social cost of the negative externalities
Taxation
Taxation Analysis
Analysis 9
 THANK YOU

Tax Revenue

Economic Growth

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Taxation Analysis
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Jalan MT. Haryono Kav. 62, Pancoran, Jakarta Selatan
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Taxation
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