10.1. Role of Tax in The Government and Economy The Government has the right to collect taxes Role...
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Transcript of 10.1. Role of Tax in The Government and Economy The Government has the right to collect taxes Role...
10.1. Role of Tax in The Government and Economy
The Government has the right to collect taxes
Role and Function of TaxSource of fund finance government
activities and developmentInstrument to manage national economy fiscal policy, tariff policy, etc
Instrument to maintain economic fairness
12.2. Types of TaxationTaxes on earnings
payroll taxTaxes on individual income
capital gain taxTaxes on corporate incomeTaxes on wealth
property tax, estate (inheritance tax)Taxes on consumption
sale tax, excise tax
12.3. Desirable Characteristics of Any Tax System
Economic efficiencyAdministrative simplicityFlexibilityPolitical responsibilityFairness
12.4. Economic Efficiency Tax system
should not distort, but promote economicefficiencyBehavioral effect of tax
all taxes affect behavior (reduce spending) tax affects on such as work behavior, savings, and investment
Corrective tax e.g. pollution tax (raises government revenues,
and improve economic efficiency)
12.5. Administrative Simplicity
Tax system ought to be easy, and relatively inexpensive
Factors affecting administrative cost of tax systemrequired recording systemcomplexity of the system
12.6. FlexibilityTax system should allow easy adaptation to changed
circumstances Changes in economic conditions change in tax rates
Speed of adjustmentsautomatic, or slow
Political constraints of adjusting rates
14.7. Political responsibilityTaxes system held accountable to the public transparent
12.8. FairnessThe tax system should be fair treating those in similar circumstances similarly (horizontal equity) imposing higher tax on those who can better bear the burden of taxation (vertical equity)
12.9. Practice of Taxation in Indonesia
Introductory NotesTax as source of fund for national
developmentIncreasing tax revenue to reduce
dependence on overseas loan for funding national development
Tax revenues increases overtime, yet, still not sufficient
Tax evasion is common place
Types of Tax Income Tax (PPh)Value added tax (PPn)Luxurious good tax (PPnBM)Land and building tax (PBB)Excise Import dutiesExport taxOther kind taxes, such as pollution tax,
retribution
Constraints to Increase Tax RevenuesLow average income per capitaUnemployment and povertyBad public awareness for paying tax Corruption Economic inequality Tax administration system expensive and
lack in public accountability
12.8. References (1)Gruber, Jonathan. 2005. Public Finance and
Public Policy. New York: Worth Publishers. Chapter 18
Stiglitz, Joseph E. 2000. Economics of the Public Sector. New York, USA: W.W. Northon and Company. Chapter 17.
Reksohadiprodjo, Sukanto. 2001. Ekonomi Publik. Yogyakarta: BPFE. Bab 8-12
12.8. References (2)Badan Pendidikan dan Pelatihan Keuangan,
Departemen Keuangan Rep. Indonesia. 2004. Dasar-Dasar Keuangan Publik. Jakarta: Badan Pendidikan dan Pelatihan Keuangan, Departemen Keuangan Rep. Indonesia. Bab 13-21.