Jakarta, IO – One of a country’s national development goals is to improve the welfare of its people by improving the education, health and economic sectors. Therefore, the government often increases the budget for welfare spending. Even during the pandemic-induced economic downturn, the government spending continues to increase. In 2021, the Indonesian government spent Rp2,786.37 trillion, up 7.4% year on year. In 2022, this is likely to hit Rp3,106.4 trillion. To catch up with the growing expenditure, the state needs to optimize domestic source of revenue, one being through tax collection.
Tax, according to Andriani (in Santosi, 1998) is defined as a contribution to the state (which can be enforced) owed by those who are obliged to pay it per tax regulations, without receiving direct counter achievement and used to finance general government spending. In dispensing its taxation duties, the government has two functions, namely budgetary (as a source of funds to finance government expenditures) and regulatory (as an entity to regulate and implement social and economic).
In other words, tax is a source of state revenue to be used to improve people’s welfare (Agung, 2007). So, tax plays an important role in financing the national development programs. In Indonesia, tax and excise accounts for 77% of total state revenue. Of that figure, tax component makes up 67%. It is no wonder that the government continues to raise its tax revenue target.
To achieve tax revenue target, the government usually has two main strategies, namely tax intensification (by increasing tax revenue from registered taxpayers) and extensification (by expanding taxable goods or services). One example of the tax intensification strategy through the tax amnesty program, aimed at increasing tax revenue from unreported income and increasing the number of taxpayers in Indonesia.
Performance of tax revenue
Tax collection performance in the period from 2009-2020 always missed its target. It was only in 2021 that it exceeded its target. In 2008, the government issued a tax amnesty program called sunset policy. As a result, tax revenue reached 108% of the target. Tax revenue hit rock bottom in 2015 and 2016. At the time, the tax revenue target jumped by 30% as Jokowi first-term administration heavily pursued infrastructure development. As a result, tax revenue was only 83% of the target. This continued until 2016.
In 2017, tax revenue increased significantly to 91%, boosted by a tax amnesty program. By the end of the program, the government managed to collect an additional Rp114 trillion. Optimal collection occurred in 2021 when for the first in 12 years tax receipt reached 107% of the target, netting the state Rp1,546.5 trillion. (FIGURE-1)
Poor tax collection resulted in Indonesia’s continuously declining tax ratio, from 11.38% in 2012 to 9.89% in 2017. In fact, the first tax amnesty program rolled out in 2017 was unable to lift the tax ratio. It further declined to as low as 8.33% in 2020 before it went back up to 9.11% in 2021. (FIGURE-2)