Tax

Tax

Created by: 
Efran Martahan
01111003049
FE-Akuntansi

UNIVERSITAS SRIWIJAYA

FOREWORD

Thank God, we say to God who has given his blessing and guidance so that I can accomplish the task of papers. This paper theme is Tax. This task aims to meet the assessment of the course Introduction to Macroeconomics

                     

I am pleased to have been able to accomplish the task of the macro-economy about Taxes. I hope this paper may be useful for other friends and hopefully this paper can add value to me.

The author would like say thank those who helped directly or indirectly to the completion of this paper. The authors wish to thank his parents who have given moral support and also give opinions on the themes raised in the writing of this paper. The author would like say thank to Mr. Tatang Abdul Madjid S, M.Si., Ph.D as teachers who have provided guidance and teaching of Introduction to Macroeconomics. The author would like to thank his friends,  which has helped the creation of this paper.

                                                                                                        The author

CONTENTS

FOREWORD............................................................................. 2

CONTENTS................................................................................... 3

INTRODUCTION.......................................................................... 4

EXPLANATION......................................................................... 5-9

CONCLUSION........................................................................ 10-11

REFERENCES............................................................................... 12

INTRODUCTION

In general, tax can be defined as a levy or other type of a financial charge or fee imposed by state or central governments on legal entities or individuals.

Local authorities like local governments, provincial governments, counties and municipal corporations also have the right to impose taxes. The rates, rules, and regulations of taxation differ from one country to another and they are complex in character. Tax is a principal source of revenue for a country's government.

The Internal Revenue Service, or IRS, is a government agency of the United States and it is primarily responsible for collection of taxes in that country.

A country's tax laws determine who should bear the tax burden, or who should pay tax. The tax rate is imposed as a certain percentage of the income earned. Taxation policies play an important role in the financial and economic development of a country.

EXPLANATION

            Tax can be defined as a levy or other type of a financial charge or fee imposed by state or central governments on legal entities or individual.

Tax can classify into 2: direct tax, and indirect tax.

Direct tax:

A direct tax is a form of tax is collected directly by the government from the persons who bear the tax burden. Taxable individuals file tax returns directly to the government. Examples of direct taxes are corporate taxes, income taxes, and transfer taxes.

Indirect tax:

An indirect tax is a form of tax collected by mediators who transfer the taxes to the government, and also perform functions associated with filing tax returns. The customers bear the final tax burden. Examples of indirect taxes are sales tax and value added tax (VAT).

There are other types of taxes, which may either be direct tax or indirect taxes, including capital gains tax, corporation tax, consumption tax, inheritance tax, property tax, excise duty, retirement tax, tariffs, wealth tax or net worth tax, toll tax, and poll tax. 

Taxation in Indonesia

Indonesian taxation is based on Article 23A of UUD 1945 (1945 Indonesian Constitution), where tax is an enforceable contribution exposed on all Indonesian citizens, foreign nationals and residents who have resided for 120 cumulative days within a twelve month period. Indonesia has a stratification of taxation including Income Tax, Local Tax, and Central Government Tax.

Statutory bodies are defined by Indonesian Taxation Law as groups of persons and/or capital which constitutes a unit. These are more clearly defined as such entities undertaking or not undertaking businesses, covering limited liability companies, limited partnership companies, other companies, state or regional administration-owned companies in whatever names and forms, firms, joint companies, cooperatives, pension funds, partnerships, groups, foundations, mass organizations, social and political organizations or organizations of the same type, institutions, permanent establishments and other forms of statutory bodies.

Taxation Rates in Indonesia

Indonesia has a series of progressive sliding rate taxes for all categories. Furthermore, as a developing nation, much economic activity is done at the 'cottage' level where sales and services taxation are tax exempt.

Indonesia's taxations system recognizes the economic reality of the majority poorer citizens and the poor are exempt from almost any taxation. The underlying ethic of "gotong-royong"- "neighbourly [sic moral] help" is applied where the more fortunate wealthier are enforced to meet their moral obligation of a heavier burden of tax- regardless of arbitrary arguments to its fairness.

The tax-free poverty threshold for Indonesian income earners is also dependent on regions as there exists some disparity between purchasing power of the Rupiah between regions and intra-regionally between larger urban cities and smaller ones. The Capital, Jakarta is considered the most expensive city in term of all goods, services and wages.

Income Tax

Income taxation is subject to Regional (Province) government regulations defined by the economic realities of that particular area. As mentioned above, the poorer denizens are exempt from almost all taxation.

Although rates are Regionally variable, for the sake of illustration income tax basically employs a progressive rate, commencing at 10% gross salary income per annum, sliding to 30% per annum. Regulations are being debated as of 2008 to include income from shares, dividends, trusts and such related.

For example, the most urbanized and industrialized region, DKI Jakarta (Special Administrative Region of Greater Municipality of Jakarta), income taxation commences with salaries greater than one million Rupiah (IDR) per calendar month, at a rate of 10%, which slides progressively to 40%.

Goods and Services Taxation

A Goods and Services Tax (GST) is levied at the rate of approx 10% at point of sale, by major vendors. Sales and services tax are exempt from cottage economies and industries.

Land and Constructions Tax

Land Tax and Tax for the buildings constructed there upon must paid annually, or may be paid via arrangement in ten year blocks by Indonesian land title deed-holders, pursuant to relevant criteria for exclusions. In general terms, this tax is applicable mainly to those of the middle classes and upwards. Land holding businesses must also pay this tax.

Land and Constructions thereupon are calculated at a value calculated by the Regional government- which is less than real market worth. This calculated value has the caveat of being a legally non-negotiable purchase price if the Government wishes to procure said land. In Jakarta, land tax is 10% of Government calculated value.

Vehicles

Passenger Vehicle Tax is required to be paid by all owners, the rationale being those fortunate enough to afford a motor vehicle can afford to subsidize their poorer brethren who rely on far less luxurious public transportation. Again, Regional Government legislates the specific definitions regarding this tax.

For the city of Jakarta, the city with the greatest vehicle ownership, most congested city, 1% of current vehicle real agreed market is due annually. Furthermore- passenger vehicles with an engine capacity greater than 4 cylinders are taxed again and as are those mass greater than 1500 kilograms (commonly four-wheel drives and SUV's).

Transportation and logistics vehicles, trucks/lorries, buses, vans and utility pick-ups are taxed according to axle number, vehicle mass and maximum safe gross loaded weight. Maximum loaded weight inspections are frequent and random and joked colloquially as the Police's cash-cow.

Petroleum is taxed at a rate of approximately 25%- though remains cheaper than neighbor developed nations such as Australia or Singapore.

CONCLUSION

Money provided by taxation has been used by states and their functional equivalents throughout history to carry out many functions. Some of these include expenditures on war, the enforcement of law and public order, protection of property, economic infrastructure (roads, legal tender, enforcement of contracts, etc.), public works, social engineering, and the operation of government itself. Governments also use taxes to fund welfare and public services. A portion of taxes also go to pay off the state's debt and the interest this debt accumulates. These services can include education systems, health care systems, pensions for the elderly, unemployment benefits, and public transportation. Energy, water and waste management systems are also common public utilities. Colonial and modernizing states have also used cash taxes to draw or force reluctant subsistence producers into cash economies.

Governments use different kinds of taxes and vary the tax rates. This is done to distribute the tax burden among individuals or classes of the population involved in taxable activities, such as business, or to redistribute resources between individuals or classes in the population. Historically, the nobility were supported by taxes on the poor; modern social security systems are intended to support the poor, the disabled, or the retired by taxes on those who are still working. In addition, taxes are applied to fund foreign aid and military ventures, to influence the macroeconomic performance of the economy (the government's strategy for doing this is called its fiscal policy; see also tax exemption), or to modify patterns of consumption or employment within an economy, by making some classes of transaction more or less attractive.

A nation's tax system is often a reflection of its communal values or/and the values of those in power. To create a system of taxation, a nation must make choices regarding the distribution of the tax burden—who will pay taxes and how much they will pay—and how the taxes collected will be spent. In democratic nations where the public elects those in charge of establishing the tax system, these choices reflect the type of community that the public and/or government wishes to create. In countries where the public does not have a significant amount of influence over the system of taxation, that system may be more of a reflection on the values of those in power.

REFERENCES

·         Wikipedia.com

·         Indonesian Tax Directorate General, Brochure: "Sudah Punya NPWP? Segara Sampaikan SPT Tahunan PPh Anda (Do you have a tax number? File your Tax Return Now)" in Indonesian