Application of Wealth Tax in Indonesia: Potential and Opportunities

A wealth tax or tax for the rich can provide a significant addition to state revenues. Based on the simulations carried out in the study, The PRAKARSA found that the potential for a wealth tax imposed on the rich and super-rich (HNWI) with a net worth of ≥Rp. 144 billion could provide additional state revenue ranging from Rp. 54 trillion to Rp. 155 trillion for a single imposition. Wealth tax revenue is estimated to be equivalent to 6,15 percent of total 2021 tax revenue and 0,46 percent of GDP.

Opportunities for implementing wealth tax received positive signals from members of the DPRRI and HNWI who were interviewed in the study. However, there are several notes that need to be corrected before the wealth tax is implemented in Indonesia, such as optimizing the current tax, preparing clear tax regulations to the level of technical implementation of tax regulations. In addition, the application of wealth tax must be accompanied by improvements in a more conducive investment climate and recognition of wealth tax payers by the government.

In the midst of increasingly sharp socio-economic inequality, Indonesia's fiscal capacity has been shaken by the effects of the Covid-19 pandemic, the wealth tax is increasingly finding its relevance. In order to increase state revenue, the government needs to consider implementing a wealth tax imposed on the super-rich. Wealth taxes are also an effective instrument for the redistribution of wealth to address inequality.

In addition to the potential and opportunities for wealth tax from a policy perspective, this study also sees that wealth tax has intersections with the conception of zakat and both can be positioned as a unit that can be institutionalized.

This research also provides a number of recommendations for the government. Read more about the potential and opportunities for implementing wealth tax in Indonesia in this report.

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