Written By: Filzah Farah Egalita
What if several billionaires in Indonesia expressed their willingness to help their country through the payment of their wealth tax to deal with COVID-19 and economic recovery? This new tax levy targets the rich to contribute more to the country, especially during the economic crisis due to the COVID-19 pandemic. A one-off wealth tax can be one of the best ways to fix the APBN deficit because of the government’s need to fund the National Economic Recovery (PEN) program which will make Indonesia’s debt at the end of August 2021 reach IDR 6,625.43 trillion with a debt to- GDP ratio of 40.48 % (Ministry of Finance, 2021).
This is because the burden of state debt is increasing rapidly while the government must need funds for PEN. Even the realization of the Economic Recovery budget is still very low, but on the other hand, the government continues to widen the APBN deficit so that foreign debt increases. In the report on the absorption of the health budget in PEN on May 11, 2021, the figure is still very low at 14.2% or around Rp. 24.90 trillion of the total ceiling of Rp. 175.22 trillion (INDEF, 2021). The government’s debt policy should be controlled because it will be useless if the debt increases while budget absorption stops, and the government must pay the current debt and interest.
Meanwhile, tax as the backbone of state revenue slowed down due to various relaxations, so various tax policies were proposed to optimize the financing of PEN. As proposed by several tax experts in the European Union, proposals for implementing a wealth tax imposed on individuals for their net worth, it is proposed to help the government with the costs of dealing with COVID-19. The Millionaires for Humanity organization even mentions that several billionaires have expressed their willingness to help their country through the payment of their wealth tax to deal with COVID- 19 and the economic recovery. In Indonesia, a survey was conducted by Glocalities and Millionaires for Humanity to 1,051 people as respondents on March. As a result, 79% of respondents support the application of the wealth tax in Indonesia. (theprakarsa.org, 2021)
However, the application of a wealth tax in Indonesia will have the challenge of high administrative costs because this wealth tax is imposed every year. Another possible solution is a one-off wealth tax. The concept of a one-off wealth tax can be applied in Indonesia as a solution to patch up APBN during COVID-19, as well as reduce Indonesia’s economic gap. An economic point of view one-off wealth tax can be imposed at a higher rate so that it gets more revenue in the short term, while a wealth tax that is repeated every year has a wider economic risk because the rich will choose to move their assets (Nick O.’Donovan, 2020). Therefore, it is very important to design the application of the right tax policy concept during a pandemic to launch the national economic recovery.
The author is a student at Brawijaya University, Indonesia.
