Thursday, October 25, 2012

Taxes and Economy in Indonesia




Tax is a fee that every individual, property owner, firms have to pay in order to support the government.  There are many kinds of tax such as income tax, sales tax, property tax, toll tariffs, custom tax, import tax, alcohol drink tax, and service tax. Tax is not a voluntary donation to the government, but every person enforced to pay the tax. Taxes can be used to public service such as infrastructure development, fuel subsidy, education subsidy, national defense, etc.Some of us should have an experience about paying tax. One of the simplest examples is PPN. If we go to a fast food restaurant, the price that we pay must be 10% higher than the price that listed on the menu. It’s because every food or beverages that we ordered were charged 10% for PPN or Pajak Pertambahan Nilai. Tax has an important part in economy. With taxes, government can build a better infrastructure and public facilitiesthat can improve our economics activities. For the example, government use taxes to build a bridge that connects two regions. People inside these two regions can interact and do economic activities that can increase the economic growth for the country. Government also uses the tax money to buy weapons and arsenals to protect the country from any threats for the good of the people. So there is an indirect reciprocity between citizen and the government.
Income tax is a tax that charged on the income of individuals, companies, firms, or other legal entities.There are many ways to set the amount of Income tax. There are Official Assessment system and Self-Assessment System. Official Assessment System means that the amount of tax is set by the government’s policy.  And the other side is Self-Assessment System.  Self-Assessment System differs to Official Assessment System. It gives taxpayer the authority to count the amount of tax by themselves. But there are major weaknesses of Self-Assessment System. Because not every Indonesian people or firms want to pay tax and they tend to seek a way to not pay tax such as tax evasion. Because the tax system in Indonesia is Self-Assessment system, many firms in Indonesia try to falsify their financial reports, hiding any real transactions.So the firm can pay less income tax or maybe possibly the firm didn’t have to pay any income tax.
One of the famous tax cases is known as “tax mafia” which is done by Gayus Tambunan.  Gayus is the one who did many of the tax evasion activities inside tax office. His position in Directorate General of Taxes in Indonesia as a reviewer’s objection staff makes him easier to do any “tax evasion” activity for his client. He utilizes the weakness spot of the self-assessment system by making a tax consultant to falsify his client’s financial reports. Corruption is also one of the problems that often happened in tax offices. Money that people pay weren’t used to do any public service. Otherwise the officers inside the tax office took the tax money and use it for themselves. One of the examples is BOS or known as Biaya Operasional Sekolah (School Operating Cost). BOS use to be some kind of educational subsidy from government that giving free education fee for elementary and junior high school. But practically BOS many times being corrupted and the people didn’t felt the benefit from that educational subsidy.


The effect of this condition to economics is of course affecting the growth of Indonesian economic. Tax evasion will affect the competition between companies. The company that didn’t pay the taxes will get more profit than the company who pay taxes even with the same business and productivity. Tax evasion also causes a stagnation growth of economy. If the company didn’t pay tax, the company won’t have to increase the production. Otherwise they will do the tax evasion to get more profit. Corruption inside the tax office also makes the condition of the economic is even worse. The tax money that the people pay was used for their own accord instead of public service. Then the result is broken bridge, damaged public schools, non-functioning public facilities, broken roads everywhere even in the big cities because lacks of maintenance. The increase of educational cost because of the corrupted educational subsidy makes the poor people hard to get an education. This condition will increase the level of poverty. The public facilities such as roads or bridges will disturb the economic activity. People who want to go to certain location will obstructed by the broken roads. It will make the transportation process even longer and inefficient. 
As a citizen, we must do something to overcome this condition. The steps that society must do to overcome the weaknesses and the effects of this condition is people have to concern about the condition if somebody doesn’t pay tax. People have to realize that he/she is living in a nation which ruled by the government. The land and building that people used to live and stay is not entirely belong to the people themselves. If people pay the taxes, the government can get more income. So then they can use it for many public services. After that, he/she can register to Tax Service Office (Kantor Pelayanan Pajak) to get a “taxpayer number” in Indonesia we called them NPWP or Nomor Pokok Wajib Pajak. And then, people have to pay taxes frequently. Not just for one or two months. People who pay taxes also get a pride for themself. He/she already showed that he/she contributed to the government in efforts to increase the economic condition. The people doesn’t have to worry about the tax will affect his/her economic condition because there is a regulation about setting the amount of tax. Tax should not affect the economic condition and slowing down the public efforts to pay the taxes.
The government also must do something to overcome this condition. The things that government must do are tax socialization. With tax socialization, we hope that more people will concerned about paying the tax. Nowadays, government already done many things to socialize tax such as commercial break on TV, billboards, etc. but I think it’s not enough to make people concerned about tax. If the effort to make people concerned about tax fails, I think government has to change the tax system from self-assessment system into the official assessment system. Therefore there will be no more tax evasion because the amount of tax is set by the government. All the citizen has to do is just pay the tax and everything will be much simpler. In order to set the amount of tax, the government also needs regulations that won’t affect the economic condition of individuals and firms.The next thing that government must do is to clean any corruption inside the tax office. If there’s no corruption, the public service will be even better and make our economic condition better. The broken roads will be fixed. The infrastructure and public facilities will be maintained properly. Poor people can get an educational subsidy from BOS and get a proper education. I think that’s all about my opinion about taxes and economics in Indonesia. I hope you get useful information from this essay.

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Name : Rafael Martin
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