Saturday, April 27, 2024 | 22:41 WIB

INDEF: VAT on Staple Foods Insignificant Boost to Tax Revenue

READ MORE

Jakarta, IO – The government plans to impose a value added tax (VAT) on several goods and services, including basic foodstuffs, education and health services, as shown in the bill on the general provisions on taxation (RUU KUP).

Finance Minister Sri Mulyani officially submitted the bill to the House of Representatives Committee XI in a meeting on Monday (13/9).

“VAT will be imposed on goods and services consumed by the public, such as staple foods, education and health services, lower than the normal rate or may not be collected. For people who can’t afford it, they can be compensated with subsidies,” she said.

She maintained that this policy is made to ensure fairness and will be adjusted according to the income levels of various community groups.

VAT will only be imposed on certain staple foods consumed by high-income groups. “For example, products like special quality rice or meat, which are normally expensive,” she pointed out, adding that it will not add any extra burden on low-income groups, especially during the current tough pandemic situation.

The imposition of VAT on health services is given for health services that are not paid through the National Health Insurance system. For example, beauty clinic services, aesthetics, to non-essential plastic surgery. “To increase the role of the community in the national health insurance system, this treatment will provide incentives for the community and the health system to enter the JKN system,” he said.

For education, VAT will be imposed on educational services provided by commercial educational institutions and those that do not implement the minimum curriculum as required by the Law on National Education System. “Schools or educational institutions with standard tuition fees, madrasas for ordinary or low-income group will not be affected,” Sri Mulyani confirmed.

However, according to Rusli Abdullah, a researcher at INDEF’s Center of Food, Energy, and Sustainable Development, potential tax revenue that can be collected under this policy is very small. He argued that the government had better pursue potentially larger income tax from business entities that have yet to be taxed. Based on his own calculations, VAT on staple foods will only contribute 1.97 percent to total tax revenue in 2020. “It would be much more substantial if it comes from corporate income tax, some medium-sized businesses that are not yet formalized can be taxed to increase the tax ratio,” he said in a virtual public discussion held by INDEF on Tuesday (14/9).

VAT for staple foods, Rusli said, may only generate Rp21.1 trillion, derived from per capita expenditure of Rp268,184 per month multiplied by 12, yielding Rp3.21 million, times the number of households, assumed to be around 65.58 million, which brings total expenditure to Rp 211 trillion. If 10 percent is deducted for VAT, then the tax revenue received by the government will be Rp21.1 trillion.

In addition, there are several practical challenges in its collection: among others, the huge size of the informal business sector in Indonesia, which will render it less than optimal. The number of taxmen in Indonesia is also still limited. There are only 45,000 fiskus (tax officials) out of a total population of 270 million people. The number of Indonesia’s tax collectors is half as many as Japan, with a population of only 126 million people. In addition, there are still many informal workers who have high revenue but have not yet registered as taxpayers. (Ekawati)

POPULAR

Latest article

Related Articles

INFRAME

SOCIAL CULTURE