Esther Samboh, Jakarta – The government's expected tax anomaly – in which tax revenues increase despite the weak economy – has yet to be seen almost halfway through the year, with tax takings remaining sluggish in May.
As of the end of the month, tax revenues reached Rp 377 trillion, contracting by 2.44 percent from the same period last year and making up less than a third of the Rp 1.29 quadrillion that needs to be collected by year-end, according to data from the Finance Ministry's tax office released Thursday.
The May tax data is reflective of the country's economy, which saw growth shrink to a level unseen since the peak of the 2009 global financial crisis, with overall value added tax (VAT) slipping 6 percent. "The economic slowdown has triggered a decrease in domestic consumption," the tax office explained in a statement.
Property tax (PBB) plunged 50 percent and income tax from the oil and gas sector nosedived by over 54 percent as of May year-on-year – all in line with weak related industries and domestic demand.
But the continued shortfall in tax revenues almost halfway through the year does not seem to have deterred the government from its ambitious target to boost tax collection by 30 percent this year from actual collection last year.
"We're not daydreaming. There are precedents," Finance Minister Bambang Brodjonegoro told The Jakarta Post in a recent meeting, referring to the 2008 tax revenues that soared to Rp 622.35 trillion from Rp 470 trillion the previous year.
The government is now trying to replicate the 2008 success, which was attributed to a so-called sunset policy that included a government tax amnesty for taxpayers to settle their previously unreported obligations without any penalties.
"People have that mind-set – businesses are weak, how could [taxes] grow? And of course they won't if it's business as usual," Bambang said.
Aside from the "reinventing policy" – the current name for the sunset policy – the Finance Ministry has upped efforts to net more taxpayers to widen the country's tax-to-gross domestic product (GDP) ratio of 11 percent, low compared with 15 percent and above in other Asian countries.
It has raised taxmen's pay to stimulate their work, planned a full tax amnesty and imposed strict punishments for tax evaders that include banning them from travelling overseas and putting them in debtors' prison.
Indonesia's tax revenues are largely dependent on corporate taxes, but the Finance Ministry wants to gradually change that. Of the 250 million people in Southeast Asia's largest economy, only 900,000 individuals pay their taxes. "That's unbelievable," Bambang said.
But economists are less optimistic. In its March quarterly report, the World Bank predicted a Rp 282 trillion shortfall in state revenues due to unrealistic tax targets that could swell the nation's budget deficit to 2.4 percent, from 1.9 percent in the official revised 2015 budget.
"A slowing economy is a drag to the outlook on tax revenue collection this year. We are of the view that tax revenue growth may only reach 3 to 5 percent higher than last year, at best. There is a good chance that it may be negative, just like what's been reported up to May," Singapore-based DBS economist Gundy Cahyadi said in an emailed response to the Post.
According to the government's most recent review, taking into account lower-than-expected tax collection and government spending, the deficit is not expected to widen to more than 2.3 percent.
Source: http://www.thejakartapost.com/news/2015/06/05/may-tax-data-a-reality-check.html