Indonesia wants to tax the rich to deal with pandemic

Indonesian President Joko Widodo.

Handout PARLIAMENT / AFP / File

Text by: Gabrielle Maréchaux Follow

4 min

In Indonesia, the government is seeking to increase its annual budget to deal with the pandemic and the economic crisis it has caused in the 4th most populous country in the world.

For this, the Parliament must vote the 2022 budget which suggests in particular to deduct 35% of the personal income of the richest.

A completely new track proposed in this country rather known in recent years for its economic liberalism. 

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From our correspondent in Kuala Lumpur,

It is while speaking of profound changes that Sri Mulyani, the Indonesian Minister of the Economy, announced at the end of May on YouTube the launch of the annual budgetary policy. " 

The 2022 budget must focus on socio-economic recovery and this requires a strengthening of the foundations of our tax system, the implementation of structural reform for the recovery to be optimal 

", assured the Minister.

At the head of the Indonesian Forum for Tax Justice, Ah Maftuchan was not disappointed when a day later, the minister announced in the wake of an unprecedented 35% tax for people earning more than 290,000 euros per year: “ 

I was really surprised and happy, admits the man, because it's been ten years that we try to make taxation a public debate but until then, the levels of taxation were still quite favorable for the richest. 

" 

No coincidence ...

Overall, Indonesia is still today one of the Southeast Asian countries with the lowest tax levels, and taxes only represent 

10% of the country's GDP

. 

But if this fairer distribution of taxation that Ah Maftuchan has been waiting for a long time finally arrives in the midst of a global pandemic, it is not by chance, he analyzes. “ 

2021 is the opportunity to rethink our tax system. And if we don't, 2022 will be really difficult. Because the law requires the State not to exceed a public deficit of 3% and with the pandemic, last year it reached 6%. Joko Widodo is certainly liberal economically, but above all he is pragmatic and the situation is alarming. 

" 

In the current gloomy context, the idea of ​​taxing high incomes more extensively has also gained ground in Indonesia, 

a majority of Indonesians

 would now be in favor. The country is also known for its very strong solidarity: it is even considered the most generous in the world by the 

Giving Index

 2021, which assesses countries according to the charitable actions of their citizens. However, it is difficult to know for the moment how this general solidarity would be combined or not with higher taxes.

But targeting high incomes specifically seems to have a bright future in Indonesia.

According to 

a report by consulting firm

 Knight Frank, Indonesia is the country that is expected to experience the fastest growing wealth in the next 5 years.

A 

carbon tax 

also provided for by the current tax reform could also help to replenish the coffers of this country which is one of the largest emitters of greenhouse gases in the world. 

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