Jakarta Faces Controversy Over Proposed Tax on Underground Economy
In a recent statement that has stirred debate across Indonesia, Deputy Finance Minister Anggito Abimanyu suggested taxing revenues from the underground economy, specifically focusing on online gambling and gaming. This statement was made during an address at the Gadjah Mada University (UGM) Vocational School Senate meeting in Sleman. Abimanyu posits that the sector represents an untapped source of tax revenue that the government should consider harnessing.
Understanding the Underground Economy
The underground economy encompasses unrecorded and unreported economic activities that are typically excluded from official statistics. In Indonesia, this includes a broad range of activities, but online gambling has emerged as a focal point due to its popularity. Abimanyu highlighted that many Indonesians engage in online sports betting on platforms based abroad—where such activities are legal—while profits from these transactions evade Indonesian tax oversight.
"Many underground economy activities go unregistered and untaxed," Abimanyu noted, indicating a significant gap in the nation’s tax system. He emphasized the potential financial benefits of regulating and taxing these activities, which could lead to increased government revenue.
Pushback from Economists
Despite Abimanyu’s optimistic outlook on taxing the underground economy, his proposal has faced substantial criticism from economists and experts concerned about its implications. One prominent critic, Nailul Huda, an economic researcher at the Institute for Development of Economics and Finance (INDEF), argued that such a tax policy could legitimize harmful behaviors rather than mitigate them.
"I don’t believe Anggito should have made that statement," Huda stated, asserting that taxing online gambling implicitly recognizes it as a lawful income source. He cautioned that this approach might actually encourage more Indonesians to participate in these activities rather than discourage them, fundamentally altering perceptions of online gambling’s legality.
The Risk of Legitimization
Critics of Anggito’s proposal contend that by imposing taxes on online gambling, the government might unintentionally make such activities appear legal and acceptable. Huda warned that online gambling operators could utilize the notion of taxation to validate their operations within Indonesia, potentially leading to an increase in participation rates among citizens.
"This stance could incentivize online gambling activities by suggesting they are compliant with national laws because they are contributing to tax revenue," Huda remarked, highlighting the paradoxical nature of the proposal.
Government Revenue Targets
The Indonesian government has set ambitious revenue targets for the upcoming 2025 State Budget, aiming for a total of Rp 2,189.3 trillion. This target includes diverse sources of revenue, with income tax (PPh) expected to contribute Rp 1,209.3 trillion, and various forms of consumption tax—like value-added tax (VAT) and luxury goods tax—projected to yield Rp 945.1 trillion. Property tax and other taxes are expected to add smaller amounts to the overall revenue.
In this context, the proposal to tax the underground economy, including online gambling, is seen as an effort to fill the gaps in these ambitious revenue targets. However, the ethical implications of legitimizing an activity that many argue is socially detrimental remain a thorny issue.
Conclusion
As Indonesia navigates its financial landscape, the debate around Anggito Abimanyu’s proposal to tax the underground economy highlights the complexity of balancing revenue generation with the broader social implications of legitimizing activities that may be harmful to citizens. The critical responses from economists like Nailul Huda underscore the necessity for the government to tread carefully in this arena, weighing the potential financial benefits against the moral and social responsibilities that come with endorsing such behaviors. As discussions continue, the path forward for Indonesia’s tax policy, particularly concerning the underground economy, remains a matter of considerable contention and public interest.
1
20
20
