Sri Mulyani expects economic improvement to shore up tax revenue

Sri Mulyani expects economic improvement to shore up tax revenue

Minister of Finance, Sri Mulyani Indrawati. (ANTARA / Screenshot from the Indonesian Ministry of Finance's Youtube)

Jakarta (ANTARA) - Minister of Finance (Menkeu), Sri Mulyani Indrawati, said she expects the improvement in economic performance, witnessed since August, 2020, to bolster tax revenues, which have contracted amid the COVID-19 pandemic.

“We will see (the situation) as a whole, because community activities and mobility have begun to increase,” Sri Mulyani said at a press conference on the development of the State Budget in Jakarta on Tuesday.

Sri Mulyani said the economic slowdown and the provision of fiscal incentives put pressure on all types of tax revenues during the January-August period this year.

This was evident in the sluggish Corporate Income Tax (PPh) revenue, which was also affected by the incentive to reduce installments and lower rates, along with high restitutions.

In addition, all types of import taxes also contracted, in line with the decline in import activity and the use of fiscal incentives for the exemption of income tax on imports under Article 22, Sri Mulyani explained.

However, there has been an improvement in economic activity since August, as evidenced by high electricity consumption, an increase in imports of raw materials and consumption, improving consumer expectations, and growing social assistance spending, which has raised hopes of an improving economy, the minister noted.

She said she believes that economic activities will revive, even though Large-Scale Social Restrictions (PSBB) have been re-applied in some areas, because people have started to adapt to activities with the observance of health protocols.

"Since June, there have been adjustments and this is hope, even though there is a resumption of tightening. So, not all activities have stopped which have an impact on the economy, because the public has been educated," she explained.

Earlier, Sri Mulyani had said the realization of tax revenue until the end of August, 2020 had only reached Rp676.9 trillion, or 56.5 percent of the target of Rp1,198.8 trillion set under Presidential Decree (Perpres) 72 of 2020.

Most of the tax revenue came from income tax (PPh) on Non-Oil and Gas, which totaled Rp386.2 trillion, or 60.5 percent of the target of Rp638.5 trillion; and, Value Added Tax (VAT), which was recorded at Rp255.4 trillion, or 50.3 percent of the target of Rp507.5 trillion.

The contribution of revenue of income tax (PPh) non-oil and gas contracted by 15.2 percent and VAT by 11.6 percent, which led to negative growth in tax revenue of 15.6 percent (year on year).

At the press meet on Tuesday, director general of taxes, Suryo Utomo, emphasized that his party will strive to make sure that tax revenue realization at the end of 2020 is optimal and approaches the predetermined target.

"We will achieve the target in Perpres 72 with maximum efforts and continue moving in that direction," he said.  

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