Jakarta. The government needs to revisit its plans to impose excise on sugar-sweetened beverages, fuel and vehicles if it were to bring up the $13 billion in additional revenue it needs to meet the massive tax collection target this year, tax expert and lawmaker said on Tuesday (07/02).
Without a tax amnesty program — that exempts tax dodgers from fines on back taxes as long as they agree to pay a small amount of fees to the government — the government would only have been able to meet 87 percent of its tax collection target last year, reflecting the country’s limitation in growing its domestic taxpayer base while facing an increasingly uncertain global economy that has also hit its commodity exports hard.
“Our tax target keeps increasing but our ability to collect has not increased significantly,” Yustinus Prastowo, the executive director of Center for Indonesia Taxation Analysis, said.
Only around 11 percent of Indonesians paid and reported their income tax in 2015, the latest data from the tax office showed.
The government collected Rp 1,284 trillion ($96 billion) from taxes, duties and excises last year, up 3.5 percent from a year earlier. But without the additional revenue from the tax amnesty program, taxation revenue only reached Rp 1,181 trillion, 5 percent lower compared to what it was in 2015.
The Indonesian government expects to collect Rp 1,499 trillion in tax this year, up 17 percent from last year.
It should be easier for the government to collect new excise taxes from a few new items rather than having to pursue millions of new tax payers, Yustinus said.
He estimated the government could collect an additional Rp 28 trillion to Rp 169 trillion from new excises on sweetened drinks, vehicles and oil fuel, assuming that the government imposes an excise rate ranging from 1 percent to as high as 45 percent.
“The purpose of imposing excise is to control consumption,” he said. “However, excise can also be used as a tool to optimize revenue collection into the state coffer.”
Currently, the Indonesian government only levies excise taxes on goods that are deemed detrimental to human health, including drinks containing ethyl alcohol, and tobacco products. The products contribute Rp 143.5 trillion to government coffer last year, down 0.7 percent from Rp 144.6 trillion a year ago.
The government has indeed been mulling to add more excise objects such as plastic wrapper, oil fuel and sweetened drinks to curb excessive consumption of the products, which are deemed damaging to the environment and has bad implications for one’s health.
Besides imposing a tax on sugary drinks, Yustinus also said that it is possible to impose a tax on fossil fuel or even fast-foods like they do in the US to curb consumption while still boosting the tax revenue.
“When the [oil] price is low, the effect will not be too burdensome. The government can add only Rp 300 or Rp 500 [for each liter]. That is not going to be much of a disincentive for people who are used to fossil fuel,” Yustinus said.
Still, pursuing the plan to impose a tax on sugary drinks such as soda or bottled tea drinks will not be easy. The Indonesian government had dropped the plan numerous times in the past amid pressures from the industry.
“Businesses will say that this [tax on sugary drinks] will badly affect them and cause inflation, however, according to the law we must treat every sector that matches the criteria to become an excise object equally,” Andreas Eddy Susetyo, a lawmaker at the House of Representatives’ Commission XI, that oversees finance and banking, said.
“I think excise can be a viable option to increase state revenue besides the tax amnesty program,” he said.
Currently, the government is pursuing a plan to levy excise tax on plastic wrapping starting this year. This plan has also been met with derision by business owners and the Ministry of Industry, who argue that the plan will make the industry less competitive
According to the government’s estimation, the excise on plastic wrap could add Rp 1.6 trillion to the government revenue annually.