Page 9 - Indonesia Taxation Quarterly Report (Q2-2020)

Executive Summary

affected by the Covid-19 virus pandemic. prudence would be required to put
These operational guidelines are outlined priorities in place, while long-term fiscal
in the Director General of Taxes Circular sustainability must be put in mind. IMF
No. SE-19/PJ/2020. This implementing projects that Indonesia would face fiscal
regulation then has been revised two deficit by 5.0% of GDP, while the rest of
times, namely SE-29/PJ/2020 and SE- the worlds are estimated to have worse.
43/PJ/2020. In addition, the government
again expanded the sectors to receive Many have raised the issue of what
tax incentives for taxpayers affected by the tax systems will look like when we
the Covid-19 pandemic. exit from the crisis that caused by the
Covid-19 pandemic. On the one side,
this is about questioning the taxation
Tax Revenue Prospect structures in the future whether there will
during Economic Recovery be new type of taxes or new tax basis. On
the other side, this is also related to how
effortful and how skilful the governments
The second quarter of this year marked in raising tax revenues to finance higher
surprising significant economic levels of their expenditures.
downturn, yet nobody can assure whether
we have passed the worst. Despite the Furthermore, since the current crisis
uncertainty, arising optimisms already does not only hit some countries or
take place to give us hopeful sense that some regions, a global response is also
this alarming condition will not hold for needed including the tax cooperation as
the part of a set of effective and well-
long. coordinated multilateral actions. In a
broader scope, this crisis also can be
In the State Budget Plan (Rancangan meant as the momentum to restructure
Anggaran Pendapatan dan Belanja the fundamental of tax systems in many
Negara/RAPBN) 2021, the government countries.
set assumptions that the economy will
grow between 4,5-5,5%. Previously, many Hence, the importance of a compelling
experts and institutions has also said the vision for future tax revenue prospect
next quarter will streak the U-turn and the also needs to be considered. This is
growth will slowly recover. Thereafter, given that the governments’ effort to
in 2021, IMF predicts that Indonesia’s raise tax revenue may be too politically
economic growth will rebound by challenging and may also lead to
spiralling deficits. Another risk is that
6.1%, notably above the world average ‘expansive’ tax policies could trigger
projection– 5.4%. Morgan Stanley even vicious political conflict between
anticipates that Indonesia can be one of the groups who feel under ‘threat’ of
the fastest countries whose economy additional tax and who are entitled to
will restore and even go back stronger special consideration.
than ever.
In the past, although the impetus
Despite of that, the level of fiscal severity and effects of the financial crisis are
is still under big question mark. No one substantially different from the current
can guarantee that the performance will economic crisis, changes in tax revenues
follow the restoration of the economy. during the period provide an example of
History (as will be shown in section C) scale of the revenue impact of a major
global shock and not independent
has shown that tax revenue betterment between one and another. On average,
will need many years to follow. it might also be seen that trends in
tax revenues and in GDP tend to move
Anticipating the upcoming state, the together in normal phase. However,
government has adjusted national during the crisis, tax revenues tend to
fiscal posture for current year. In June, fall faster and recover much slower
the government released Presidential than GDP when GDP growth is limited or
Regulation (Perpres) Number 72 of negative.
2020 as a revision of Government Reg.
Number 54 of 2020 which contained For the present crisis, some experts in
changes in posture and details of the taxation mainly suggest the alternative
APBN 2020 fiscal year. Next year, similar to revisit the fundamental tax system

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