Indonesian tax return policy in the perspective of revenue, equity, and efficiency

The paper examines the tax return policies which have been implemented in Indonesia, after the introduction of self assessment system in 1984. Using a qualitative approach, the paper notes that the tax return policy swung from the equity perspective in 1984 to a more pragmatic policy in 1995. and finally it bounced back to the equity side in 2001. Furthermore, data reveals that the 2001 tax return policy, which obliges employee type individual taxpayers (EITs) to file tax returns, posted an obvious weakness from the effciency side. In the period of 2001-2010, the number of individual tax returns increased significantly, but the individual tax revenues did not increase accordingly, and it was also marred by the occurrences of paradoxical situation in which number of tax returns had negative relation with tax revenues. However, in spite of its weakness, the 2001 tax return policy played crucial roles in promoting the equity in the tax system and increasing the tax awareness. Finally, the paper suggests several measures that may reduce the negative effects of the 2001 tax return policy.

taxation

Indonesian tax return policicy

tax return filing compliance

equity

cost efficiency

tax revenue