Page 11 - Working Paper (Narrowing Tax Gap: Cross Countries Experience)
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DDTC Working Paper 0915

                                            Table 5 - Countries’ Tax Effort by Level of Development

                                                                 Income                    Average
                                                                           Total   Per capita GDP,   Tax   Tax
                                                        Minimum  Maximum
                                                                         Revenue   PPP 2005   Effort  Capacity
                         Low Income                       642.1   4752.3     17       2169.4  0.65      26
                         Middle Income                     4929  17885.4    24.1      10554.1  0.64   37.3
                         High Income                    18987.4  68458.7    34.2      32763.3  0.76   45.1
                        Source: Data is extracted from Fenochietto, and Pessino (2013)

                   to be efficient in collecting taxes with low levels of   especially  for  oil,  surged.  As  the  global  financial
                   evasion.                                         crisis happened, Indonesia’s tax ratio dropped and
                                                                    hardly recovers to the pre-Global crisis levels.
                   4. Overview of Indonesia’s Tax                      In  terms  of  the  structure  of  Indonesia’s  main
                   Performance                                      revenues, income taxes, both oil & gas and non-oil
                                                                    & gas, accounted for about 5.6 percent of total tax
                             bAsEd oN iNTErNATioNAl                 revenue in 2013. Value added tax (VAT) accounted
                                 ExpEriENCE, ThErE is A             for 4.2 percent.
                                   possibiliTy ThAT ThE
                          GovErNmENT Could rEACh                       Alongside  oil and gas sector  challenges
                     TAx-To-Gdp rATio iN 2019 AT 15.3               and  macroeconomic  factors, recent policy
                       pErCENT or biT lEss ThAN ThE                 and administration changes are likely to have
                                                                    influenced revenue performance. There have been
                      TArGET of ThE prEsidENT sETs.                 policy  changes  in  corporate  income  tax  (CIT)  (a

                                                                    progressive tax schedule was replaced with a flat
                                                                    tax rate of 30 percent in 2009, which was reduced
                      Aforementioned, Indonesia currently has a very
                                                                    to 25 percent in 2010), personal income tax (PIT)
                   large gap between  actual  and potential revenue.
                                                                    (the top marginal tax rate was reduced and non-
                   Relative  to  its  regional  and  emerging  countries,
                                                                    taxable  income threshold increased in 2009  and
                   Indonesia has one of the lowest ratios of revenue-
                                                                    2013).  Several  tax  administration  changes  have
                   to-GDP (15.8 percent in 2013) and tax-to-GDP (11.9
                                                                    also  been  made,  including  VAT  e  filling  and  the
                   percent  in  2013).  Indonesia’s  tax  ratio  has  also
                                                                    start of the National Tax Census in 2011.
                   been unable  to recover  to pre-crisis  levels. After
                   the Asian Financial Crisis, Indonesia’s tax revenues
                                                                       The  new government under  President  Joko
                   moved in parallel with strong nominal GDP growth,
                   peaking in 2008 as key commodity export prices,
                                                                    27 World Bank, 2014,”Indonesia Quarterly Review” WB Jakarta Office.
                                     Figure 5 - Indonesia: Tax Ratio and Buoyancy in Indonesia (2008-2012)


                                                                                                 Tax Ratio
                           %                                                                     Tax Buoyancy
                              4                                                                  GDP Growth


                                     2000  2001  2002  2003  2004  2005  2006  2007  2008  2009  2010  2011  2012  2013


                                                    Source: : Government Financial Statistics, IMF
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