Prabowo-Gibran’s tax idea has been heavily criticized, why? News – 1 hour ago

Jakarta, CNBC Indonesia – Indonesian tax experts and practitioners criticized one of the promises of the presidential and vice presidential candidate pair (paslon), Prabowo Subianto-Gibran Rakabuming Raka, namely regarding taxes.

Meanwhile, the promises made regarding taxes are to increase the non-taxable income limit (PTKP) and reduce the income tax rate (PPh) Article 21 to increase the ratio of tax to gross domestic product (GDP) or tax ratio.

“Raising the limit for Non-Taxable Income (PTKP) and reducing the PPh 21 rate to encourage economic activity in order to increase the tax ratio,” wrote Prabowo-Gibran in the vision, mission and work program document “Together with Advanced Indonesia”, quoted Sunday (29/10/2023).

Executive Director of the Pratama-Kreston Tax Research Institute (TRI), Prianto Budi Saptono, said that the Prabowo-Gibran policy plan has the potential to weaken the tax ratio which is currently around 9%, even though it could reach the level of 10.39% in 2022 or the highest in 7 last year.

Prianto said that the performance of PPh 21 so far is still very good, reflected in the realization of tax revenue performance for the January-September 2023 period which was just announced by the Ministry of Finance (Kemenkeu) a few days ago. With a contribution of 11.2% to total revenue, PPh 21 deposits still grew 17.2%, slightly down from 21.4% in the same period last year.

“PPh 21 is still growing double digits. If PTKP rises and PPh 21 rates fall, there is the potential for a decrease in PPh 21 revenues, and if you look at the PPh 21 factor alone, the tax ratio will automatically have the potential to fall,” said Prianto to CNBC Indonesia, Friday ( 10/27/2023).

Prianto explained that PPh 21 is actually more focused on employee income, which is actually limited. Thus, he considers that the contribution of the PTKP policy to increase and the PPh 21 rate to decrease will not be significant for increasing the tax ratio.

According to him, so far the government has tried various policies to increase the tax ratio by increasing PTKP, changing PPh rates and VAT rates, tax amnesty, PPS, and sunset policy. However, the tax ratio still continues to decline.

“So, the aspect that influences the tax ratio focuses on tax compliance. Tax compliance itself is a complex matter,” emphasized Prianto.

Similar criticism was conveyed by the Research Manager of the Center for Indonesian Taxation Analysis, Fajry Akbar. Fajry said that Prabowo-Gibran’s vision and mission were not in line with what President Joko Widodo’s government was doing, namely wanting to increase the contribution of PPh 21.

“That’s why, yesterday in the HPP Law (Act on Harmonization of Tax Regulations) the government increased the PPh 21 rate for rich people at the highest level, then there was a tax on in-kind. All of this was to increase the contribution to income from PPh 21 OP (individuals),” said Fajry .

Fajry reminded that in an ideal tax revenue structure, tax revenue depends on PPh 21 revenue. Thus, he considers that the Prabowo-Gibran vision and mission of increasing the PTKP limit and reducing the PPh rate will actually reduce the tax ratio.

“And the most important point, our PPh 21 OP contribution to tax revenue is still small compared to OECD countries. PPh 21 OP should be the focus of tax revenue,” he said.

He also emphasized that the increase in PTKP was not only enjoyed by low-income groups but also high-income groups. The increase in PTKP is not only enjoyed by low level groups but also high level groups and according to him, Indonesia’s PTKP is one of the highest in ASEAN, as has also been stated by the Minister of Finance, Sri Mulyani.

“So it’s clearly inconsequential. If you say that this policy plan is progressive or pro-people, then it’s not correct. The rich actually benefit the most. Not to mention if we include regional aspects, some regions have low minimum wage. If it is increased again, pity the regions that “The UMR is small, you could lose a lot of revenue,” said Fajry.

He also reminded that the PPh21 tariff is multilayer, the amount of the tariff depends on the level of income and in the Prabowo-Gibran vision, mission and work program documents, the related details are also not clearly stated. The target tax ratio was not mentioned in the document, because it only stated that it would increase.

“So, which tariff layer do you want to reduce? The policy direction in the vision and mission is not clear. And the Prabowo-Gibran vision and mission are not in line with what the Jokowi government has done, namely wanting to increase the PPh 21 contribution,” said Fajry.

[Gambas:Video CNBC]

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