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Part II - Reframing Public Finance: Promoting Justice, Democracy and Human Right in Government Budgets for Indonesia

 

  • What should enabling environments include?
  • What would be the challenges?


In Indonesia, there are many challenges that will be faced at this time because I see that there are still many gaps that occur in Indonesia, especially related to taxes justice. In this case, what I highlight is that tax justice is generally seen from three perspectives, namely relations and tax justice between countries, distribution of fiscal burdens among taxpayers, and relations between the state and society. In my opinion, these are things that need to be considered as part of the environment involved in tax justice. As stated by De Renzio and Lakin that various tax policies and practices in society must involve the role of the community itself and other aspects related to the creation of justice.


“We think that such an alternative approach should aim to put people – human beings with their needs and aspirations – back at the center of government policy-making and of budget processes and should be based on the complementary principles of justice, democracy, and human rights”.- De Renzio and Lakin, 2019.


Why are Indonesian people still biased in this proportion of tax justice? The small people are pressured to pay taxes, but the benefits of public services are still far from people's expectations. In addition, in the context of the business world, the income tax contribution of company owners is still very minimal and can also be much smaller than the income tax paid by employees.


The following data below is from sources I obtained regarding the illustration of the proportion of tax injustice in Indonesia. According to data obtained from the World Bank, it is explained that the richest 1% of people in Indonesia control 50.3% of the total wealth of the Indonesian population. Meanwhile, if the coverage is expanded, the richest 10% of people in Indonesia control 77% of the total wealth of the population. In fact, data from the Deposit Insurance Corporation states that 56% of total deposits in domestic banks worth Rp 2,352 trillion are only owned by 210,668 accounts or 0.13% of total accounts. The value of each account's deposits is above Rp 2 billion.


From this data, the very rich should have made a major contribution to tax revenue, but in fact the opposite is true, in 2015, employee income taxes through Pph 21 reached Rp. 114.5 trillion. However, what has happened to companies and individuals who own a business or company is only around Rp. 8.3 trillion, this can be seen from the figures for PPh 25 and PPh 29 which are deposited into the state treasury.


This trend continued until the end of April 2016. The achievement of tax revenues from PPh article 21 until the end of April reached Rp. 35.9 trillion. As for PPh article 25 and PPh article 29 for private individuals, only Rp. 3 trillion.


The data I have obtained is an example of what has happened to tax justice in Indonesia.


Sources:

1.   https://www.kemenkeu.go.id/publikasi/berita/menkeu-paparkan-fokus-  kebijakan-fiskal-2023/

2.   https://investor.id/archive/meluruskan-keadilan-pajak

 


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