Taxing the barber will not close Indonesia’s revenue gap
Small businesses are brought into the the tax net once the state shows them what registration buys. Indonesia offers that deal only to its bigger borrowers.
Indonesia's tax revenue gap cannot be closed by taxing small businesses like barbers and salons, according to President Prabowo Subianto's special envoy for climate and energy, Hashim Djojohadikusumo. His estimate of Rp 1.5 quadrillion (US$83 billion) annually is based on a flawed premise. While Indonesia's tax-to-GDP ratio is 9.31 percent, research by The PRAKARSA suggests the shadow economy is closer to a fifth of GDP, far below the 30 to 40 percent mark Djojohadikusumo used.
Corporate income tax compliance losses alone averaged Rp 160 trillion annually between 2016 and 2021, making up roughly one-third of total corporate tax obligations. VAT compliance losses, estimated at Rp 386 trillion annually, are also significant, with informality playing a role. The current VAT registration threshold may be a key factor as some enterprises deliberately cap their turnover just below the limit.
Written by urgent.news from The Jakarta Post Academia's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
