The Dream of a Welfare State
Only 400 rich individuals paid more than US$500,000/year of income tax in Indonesia and around 1500 paid above US$200,000/year. The numbers have surprised many especially because some bankers predicted there are at least 30,000 Indonesians categorized as super-rich individuals.
National Ombudsman Commission (KON) believes number of rich Indonesians is way above 2,000 listed as biggest individual taxpayers with payment over US$200,000/year. Why? There are several possibilities:
1) Tax Office is not aggressive enough in hunting down the rich or if they do, they might have been collaborated in paying less tax than they should.
2) Poor registration of shareholders or records about dividend payments.
3) The riches have transfered the benefits overseas to escape from tax payments.
4) The riches have been "taxed" by politicians where they recorded as "expenses".
5) Repatriation of dividends to shell companies controlled by Indonesians in BVI, Mauritius, Solomon Islands etc.
Hopefully tax office could get higher payments from the rich and get more rich individuals to pay tax properly. It needs good recording system/database about the richest people.
Tax is the most powerful instrument for the State to implement Constitution. Indonesia's Constitution is actually written with social democratic flavors to create a welfare state. Article 28 of 1945 Constitution for example clearly stated...the poor and neglected child should be taken care of by the State. How to implement that? The State should generate more money from tax and other incomes.
But if we ask political parties what will they do on tax if they're in power? All of them would come up with somewhat similar answer. So, don't expect Golkar, PDI-P, Democrat Party, PKS, PPP, PAN, PKB, Gerindra, or Hanura could give you an answer that clearly differentiate one of them.
Ask potential president candidates like the incumbent president SBY, former president Megawati, or people like Amien Rais, Gus Dur, Wiranto, Sultan Hamengku Buwono or Sutiyoso, Sutrisno Bachir, Rizal Mallarangeng about their tax policies, you would likely get similar answers. Don't expect them to come up with detail programs like what Barrack Obama offers in his campaign for US presidency: higher tax for the rich, lower tax for workers and low-income group.
OK, forget about progressive tax rate like what has been applied in countries claimed themselves as "welfare states" where the top group should pay up to 57% while lower-income group with 15% only where the money used to finance social expenses like healthcare subsidy, lower education costs, etc.
But Indonesia could start with better database to chase the rich individuals, especially family members of the family business groups, politicians, executives in public and private sectors, judges, auditors, consultants, experts/commissioners, writers, artists, musicians, etc. We believe we could easily get the list of 50,000 wealthy Indonesians.
According to a recent data, personal income tax payment reached only Rp31 trillion while corporate income tax reached Rp161 trillion or one fifth. In other countries, the gap between personal and corporate income tax payments is pretty small.
Indonesia do implement higher stamp duty on luxury cars. But may be government should raise them again. And other luxury items or houses/apartments. Luxury tax for cars could reach as high as 75% while luxury apartments and houses at 20%. This should be amended let say for luxury apartments with price tag above US$250,000, luxury tax will be 75%. It's not fair to tax luxury cars with the price tag of US$100,000 at 75% while apartment with price tag above US$100,000 only 20%, right?
READ MORE!!!
National Ombudsman Commission (KON) believes number of rich Indonesians is way above 2,000 listed as biggest individual taxpayers with payment over US$200,000/year. Why? There are several possibilities:
1) Tax Office is not aggressive enough in hunting down the rich or if they do, they might have been collaborated in paying less tax than they should.
2) Poor registration of shareholders or records about dividend payments.
3) The riches have transfered the benefits overseas to escape from tax payments.
4) The riches have been "taxed" by politicians where they recorded as "expenses".
5) Repatriation of dividends to shell companies controlled by Indonesians in BVI, Mauritius, Solomon Islands etc.
Hopefully tax office could get higher payments from the rich and get more rich individuals to pay tax properly. It needs good recording system/database about the richest people.
Tax is the most powerful instrument for the State to implement Constitution. Indonesia's Constitution is actually written with social democratic flavors to create a welfare state. Article 28 of 1945 Constitution for example clearly stated...the poor and neglected child should be taken care of by the State. How to implement that? The State should generate more money from tax and other incomes.
But if we ask political parties what will they do on tax if they're in power? All of them would come up with somewhat similar answer. So, don't expect Golkar, PDI-P, Democrat Party, PKS, PPP, PAN, PKB, Gerindra, or Hanura could give you an answer that clearly differentiate one of them.
Ask potential president candidates like the incumbent president SBY, former president Megawati, or people like Amien Rais, Gus Dur, Wiranto, Sultan Hamengku Buwono or Sutiyoso, Sutrisno Bachir, Rizal Mallarangeng about their tax policies, you would likely get similar answers. Don't expect them to come up with detail programs like what Barrack Obama offers in his campaign for US presidency: higher tax for the rich, lower tax for workers and low-income group.
OK, forget about progressive tax rate like what has been applied in countries claimed themselves as "welfare states" where the top group should pay up to 57% while lower-income group with 15% only where the money used to finance social expenses like healthcare subsidy, lower education costs, etc.
But Indonesia could start with better database to chase the rich individuals, especially family members of the family business groups, politicians, executives in public and private sectors, judges, auditors, consultants, experts/commissioners, writers, artists, musicians, etc. We believe we could easily get the list of 50,000 wealthy Indonesians.
According to a recent data, personal income tax payment reached only Rp31 trillion while corporate income tax reached Rp161 trillion or one fifth. In other countries, the gap between personal and corporate income tax payments is pretty small.
Indonesia do implement higher stamp duty on luxury cars. But may be government should raise them again. And other luxury items or houses/apartments. Luxury tax for cars could reach as high as 75% while luxury apartments and houses at 20%. This should be amended let say for luxury apartments with price tag above US$250,000, luxury tax will be 75%. It's not fair to tax luxury cars with the price tag of US$100,000 at 75% while apartment with price tag above US$100,000 only 20%, right?
READ MORE!!!
posted by yosef at 6:40 PM
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