Dino Patti Djalal, left, Indonesia's former deputy foreign minister, Australia's ambassador to Indonesia Paul Grigson, Rodrigo Chaves, the World Bank country director for Indonesia and award-winning actor Reza Rahardian pose at the Supermentor16 press conference on Tuesday (18/10). (JG Photo/Tabita Diela)

Sri Mulyani: Tax Amnesty First Step to Reduce Poverty, Inequality


OCTOBER 18, 2016

Jakarta. Indonesia's flagship tax amnesty program is the first step of a wider tax reform by the government and will play a major role in improving the country's ability to finance education, health and infrastructure. The ultimate goal is to reduce poverty and inequality, Finance Minister Sri Mulyani Indrawati said on Monday (17/10).

"A wholehearted tax reform will increase public trust for the Directorate General of Taxes — we have to start a more trusting relationship between the taxpayers and the government," Sri said.

The Directorate General of Taxes is planning to revise the General Taxation System (KUP), the Value-Added Tax Law and the Income Tax Law to improve the country's taxation system and boost tax revenue in the long run.

Sri made her remarks in front of over 2,000 Indonesian youths gathered for the 16th Supermentor event in Jakarta. The event is the brainchild of Dino Patti Djalal, the former deputy foreign minister and also the founder of the Foreign Policy Community of Indonesia.

"The country needs more tax revenue. We can redistribute wealth from the rich to improve welfare for the poor," Sri said.

Tax collection — targeted to reach Rp 1,539.2 trillion ($118 billion) in the 2016 revised state budget — contributes 86 percent of the government's total revenue, yet Indonesia's tax-to-GDP ratio remains at a low 11 percent. Compare that to Malaysia's (15.6 percent), Singapore's (13.85 percent), the Philippines' (12.89 percent) and Thailand's (15.45 percent).

"The economy will grow faster if we can reduce poverty and inequality, that's why it's important to pay tax," Sri said.

The tax amnesty program has seen Rp 3,826.8 trillion in previously unreported assets by Tuesday morning. It has given Rp 97.6 trillion in additional tax revenue to the state coffers and signed up 17,708 new taxpayers as of Oct. 12.

Before Sri delivered her speech, Rodrigo Chaves, the World Bank's country director for Indonesia, told the press that the government needs to invest in human capital — which includes education, health and early childhood development — and in infrastructure to generate more capital and increase productivity.

"Productive people give more to the society, and also tend to earn more," he said.

Equal education and healthcare access, Chaves said, will help children from low-income families get well-paying jobs, ending the circle of poverty.

According to Indonesia's Statistics Agency, 28 million people live in poverty in Indonesia, nearly 11 percent of the country's 260 million population.

Indonesia has earmarked 20 percent of its budget, or Rp 416.6 trillion, for education and five percent, or Rp 104.1 trillion, for health in 2016.

Speakers at the event included other influential figures, including award-winning actor Reza Rahardian, Australia's ambassador to Indonesia Paul Grigson and Vivi Alatas, the lead economist for the World Bank's poverty program in Indonesia.

The event also marked the International Day for the Eradication of Poverty on Oct. 17.