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investment vehicles and tax provisions During 2010-2013 Fiscal Year, a one
which act as a barrier to the use of different percent decrease of economic growth lower
financial products which reduce the cost of than the assumed figure would cause a
34
capital . larger deficit by around IDR 4.5 – 5 trillion.
Depreciation of Rupiah and an increase
The government also plan to give tax in the 3 month SBI interest rate would
amnesty to offshore assets and income also raise APBN deficit because the cost of
and would make immunity from all APBN financing increases. Therefore, the
charges of financial crimes in exchange government must apply policies that suit
of repatriating assets to Indonesia. This to fiscal sustainability and macroeconomic
effort considers additional revenues in stability. Although effort to increase tax
the near future but carries the risk of revenues would narrow the deficit; the effect
moral hazard and non-compliance that to the whole economy in the short span
could impede revenue realization in the would be counter-cyclical especially during
future. It is highly recommended that the economic slowdown. The government must
government synergize short- and medium- surely apply relaxed fiscal policies through
term target before implementing the tax incentives, foster capital and social
policy. Furthermore, the government has government expenditures to help domestic
introduced some fresh steps that include demand from decreasing further.
the introduction of electronic tax return
submission, improving tax audit towards • Reallocating unproductive government
alleviating transfer pricing especially on big expenditure to create more fiscal space
multinational corporations, and intensively and relocating items to productive sectors;
supervise industries or businesses that • Intensify government agenda on tax
are prone to tax evasion. One of the compliance focusing on large taxpayers
necessary conditions for the above efforts during a crisis and enhance the scrutiny
to be succesfully implemented is to have of cross border transactions; firm
an increase ratio of tax officials to potential enforcement should be focused against
number of taxpayers. businesses that have the capacity to pay
4.2 Policy recommendations but refuse to do so.
In the medium/long-term or after
In the end, the author divides policy
the economy survives from the crisis, the
recommendation based on the two possible
government could exercise what economists
timings – short and medium/long term. In
say as “Ricardian Equivalence” where the
the short term, the government needs to:
authorities would primarily and directly
• Improve the quality of central and local focus on tax collection enhancement
government spending. These include, but and remove some of tax incentives
not limited to: (i) identify the bottleneck previously enacted to compensate the
and constraint of the government amount of tax receipts forgone during
procurement processes and delays the crisis. As abovementioned, this tight
in the disbursement; (ii) strengthen fiscal policy should be complemented
collaboration and coordination of line with accommodative monetary policy.
ministries in structuring good budget Combination of the two policies would
planning (e.g. medium-term plan and the crowd in private investment and further
government yearly work plan as well as positively spur private consumption, exports
line ministries budget execution plans); and eventually the economy as a whole.
(iii) improvement in government budget
administration; (iv) consider and enhance
fiscal risk and contingent liabilities
calculation into the national budget
preparation to accommodate uncertainty
in macroeconomic indicators; (v) provide
stick and carrots to the performance of
local governments.
34. OECD (2009),”Strategic Response to the Financial and Economic
Crisis”, OECD Report.
