Income Tax Issues on the Omnibus Law and Its Implications in Indonesia

This research has two objectives. The first objective is to analyze the issue of income tax policy based on the idea of taxation omnibus law. In 2020, Law No. 36 of 2008 concerning Income Tax was amended twice as stipulated in Law No. 2 of 2020 and Law No. 11 of 2020 (Job Creation Law). The second objective is to analyze the implications of income tax policy changes on taxation practices in Indonesia. This research is a descriptive qualitative study using data collection techniques in documentation and literature studies. The research concludes that the omnibus law policy aims to encourage domestic investment funding. Income tax issues in Law No. 2 of 2020 include lowering the corporate income tax rate and imposing taxes on trade through an electronic system. Besides, the issue of income tax in Law No. 11 of 2020 includes tax subjects' determination, the territorial system's adoption, tax objects' exclusion, and changes to the provisions on dividends. The implication of the change in income tax policy on taxation practices is that taxes distort the economy. The delegation of regulations for reducing income tax rates to the government through government regulations creates legal uncertainty. Thus, it is necessary to have tax regulations with minimal complexity, not overlap, provide legal certainty, and further encourage voluntary tax compliance.

Political Justice and Tax Policy

In addition to valuing whether a tax policy is equitable, efficient, and administrable, I argue we should ask if a tax policy is politically just. Others have made a similar case for valuing political justice as democracy in implementing just tax policy. I join that call and highlight why it matters in one arena—tax exemption. I also further that discussion by arguing that politically just tax policy does the least harm to the democratic functioning of our government and may ideally enhance it. I argue that our right to an equal voice in collective decision-making is the most fundamental value of political justice. To test this case, I evaluate our choice to exempt “social welfare organizations” from the U.S. income tax. In addition to efficiency and equity, I also ask whether the policy is politically just in a democratic sense. I examine three models of democratic justice: liberal, republican, and deliberative. In making the democratic case, I try to find commonalities among the three in order to further what an agreed upon notion of democratic justice might look like in the tax context. I contend that the notion of democratic justice must exist at the substantive level of the Internal Revenue Code (“Code”). This Code-level application demonstrates that the typical criteria of efficiency and fairness do not provide sufficient criteria to evaluate the justice of tax-exempt policy. Political justice provides additional important evaluative criteria. There are likely significant other parts of income tax policy that need to be considered from the value of political justice as democracy as well.

Tax reforms and income inequality in former Yugoslav countries: Escaping the avant-garde neoliberalism in the income tax policy

After the breakup of former Yugoslavia Croatia, Serbia and Slovenia followed different income tax reform trajectories that could explain currently different levels of income inequality in these countries. Our paper analyzes redistributive effects of introducing progressive tax systems, like the ones currently implemented in Slovenia and Croatia, in the Serbian context. Using microsimulation modeling and Survey on Income and Living Conditions data for 2017 our results suggest that implementation of both Croatian and Slovenian tax system would yield lower levels of income inequality and poverty if applied in Serbia. Slovenian system achieves larger decrease in inequality due to higher tax burden on the top incomes and brings significant increase in tax revenues. Croatian tax schedule achieves stronger decrease in poverty as more generous personal allowance exempt higher portions of low incomes from labour taxes.

Disaster Response in Indonesia: Initiating Income Tax Policy Pro Disaster Mitigation

As a country with high potential for natural disaster, Indonesia can suffer from economic disruptions arising from significant decline in gross domestic income (GDP) due to financing losses caused by natural disaster. To reduce the risk of loss caused by natural disasters, the government has issued disaster mitigation policies in the form of structural and non-structural policies. In 2018, the government initiated a disaster mitigation policy in the form of natural disaster insurance prioritized to protect state assets. It does not exclude the possibility that this insurance shall be given to civil society, yet an issue arises regarding the source of funding for the insurance. Tax instruments are expected to be a policy innovation to overcome the issue of financing insurance. The purpose of this study is to explore the potential and role of fiscal policy through tax instruments in the context of disaster management in Indonesia. This study applied a qualitative approach and collected data through field studies and in-depth interviews. The findings of this study indicate that the natural disaster insurance policy may adopt the concept of tax allowance on donation and zakat as stipulated in Law No. 36 of 2008 on Income Tax. This incentive provides a tax facility in the form of tax allowance on income for calculating Income Tax. The policy is expected to attract the community to participate in natural disaster insurance amid the general lack of participation in insurance in Indonesia. On the other hand, the government obtains a source of revenue to finance disaster mitigation without disrupting the economy of the country.

Flat-Rate versus Progressive Taxation? An Impact Evaluation Study for the Case of Romania

Taking into consideration the recent debates on adopting a progressive tax system over the flat-rate taxation, our paper aims to investigate the impact of a change in the current Romanian personal income tax policy system from the 10% flat-rate tax system to some alternative progressive taxation scenarios. The methodological approach consisted in using the European Union Survey on Income and Living Conditions (EU-SILC) database to micro-simulate the impact upon poverty and income inequality. Through our ex-ante tax policy analysis we bring empirical evidence of a modest, but positive effect upon poverty rate and income inequalities in favor of a progressive taxation system. However, when looking at the government financial implications through the personal income tax budget revenues, we discuss upon the possible trade-off between the benefits on poverty and income inequalities and the possible budgetary drawbacks. Despite the data limitations, this study has the benefit of being among the first attempts to evaluate the impact of a personal income tax policy reform for the case of Romania.

MICRO, SMALL, AND MEDIUM ENTERPRISES TAXPAYER PERCEPTION ON THE DETERMINATION OF FINAL INCOME TAX POLICY ACCORDING TO GOVERNMENT REGULATION NUMBER 23 YEAR OF 2018

The Government has issued a new provision on Income Tax on Micro, Small, and Medium Enterprises (MSMEs), namely Government Regulation Number 23 the Year of 2018 about Income Tax Of Businesses Received or Obtained by Taxpayers Who Have Certain Gross Circulation, effective from 1st July 2018. The Government Regulation revokes Government Regulation Number 46 the year 2013 which has been effective for five years since its enactment on 1st July 2013. This new regulation is considered very important, especially for MSMEs because it regulates the reduction in final income tax rates for MSMEs with a turnover of maximum Rp. 4.8 billion per year, to 0,5% originally 1% (Government Regulation No.46/2013). The method used is descriptive analysis with a quantitative approach using questionnaires with respondents are MSMEs taxpayers in the knitting industry. The results of the research show that in general, knitting industry MSMEs do not know and understand about the implementation of Government Regulation Number 23 the Year of 2018. Taxpayer's perception of fairness is at 3.04, Certainty at 3.14, Convenience 3.20, and Economy/Efficiency 3.50.