By Fergy Fharadiva Andreas, Employee of the Directorate General of Taxes
Forming Public Trust during Pandemic Through Economic Recovery Plan
Covid-19 outbreak has stirred up chaos from its early stage of maneuver to up until now and shows no sign of stopping. Therefore, the underlying premise set to the conception of institutional government is will they perform effective public policy upon the promises they made when they oblige us paying taxes to the total amount of trillion rupiah each year. Consequently, this national pandemic is the moment to put government we trust into the test and scrutinize their performance.
Covid-19: Public Trust and Public Information
Public Trust is always classic tricky task for government. We might think we’ve got it but for whatever reason, there will always be another negative sentiment, critic, or distrust roaming around in our society echoing in their chamber disapproving all of our sincere effort we’ve put to help people so far. The key is transparent public information as much as possible to counter misinformation that fuel negativity.
At least there’re several symptoms that indicate public distrust towards government. First is panic buying occurring when President Jokowi announced first covid-19 positive cases on march second. it’s largely triggered by psychological factor caused by asymmetrical information. Without precise and concrete instruction, people are afraid of two things, inflating price and supply scarcity. It then made sense for them to take matters into their hands and pile up stocks while they can in order to survive.
Second is uncooperative action where while the information about Covid-19 is already abundant and relatively accessible, still some folks consciously set aside the despicable consequences they would incur once they catch the virus and choose to disregard social distancing anyway. So, Is there really public distrust towards governmental institution? Has it hindered citizen to have positive empathetic attitude to it? How is government sincere effort translated into society public distrust?
Indonesia’s Economic Recovery Plan?
Interconnected economy has not only helped us collectively develop but it also forces us to bear the burden falling onto our neighbours. Many are worried that Indonesia will be hit by another large capital outflows like the one in 1998 and 2008 crises because investors would be more likely selling off their riskier assets and putting it in safer harbors.
Ultimately, understanding the gravity of Covid-19 possible impact on our economy allows us to see how it triggers trauma to society and therefore protecting them from not only health issue but also economic calamities is essentially our best interest. Especially when according to Kantar media, nearly majority of Indonesian are more concerned about financial security than health issue. But what exactly is government doing to ensure that to happen? What is our recovery plan?
The answer is PP No.23/2020 National Economic Recovery Plan (PEN). The goal is to cushion Covid-19 impact and because Economic crisis occurred due to poor system to supervise and hold institution in power accountable letting market lost its confidence, big capital rushed out and most of all, people on the ground lost their trust as well, Government now has clearer protocols to keep PEN accountable. President Jokowi further calls for greater transparency for Covid-19 budget allocation. So, from the fiscal perspective, not only that the allocation will be subjected to national allotment audit by Indonesian Supreme Audit Institution, government kept us up-to-date to progress and changes as well.
Crossroads of Tax revenue and Stimulus package
Covid-19 has presented us casualties we’ve never seen before in at least health, social, economic and financial aspect of our life. It hunts down economic activity and leave tax revenue collection in jeopardy. Tax revenue collection is certainly adversely affected by this. This was explained by Minister of Finance Sri Mulyani Indrawati that the realization of tax revenues until the end of June 2020 was valued at Rp531.7 trillion or 44.4% of the 2020 National Allotment target which was amended according to Presidential Decree No. 72/2020 worth Rp1,198.8 trillion.
Government is in awry position where we have to inject much money into the economy but still need to have enough budget to suffice our needs next year. But, it is crucial for the government to take on expansionary measures by injecting money into the economy because the economy must work first so that the government can collect tax revenue.
That’s why government comes in with trillions stimulus package ensuring an ability to maintain macroeconomic stability and push more consumption by providing counter-cyclical approach through state equity participation, Funds placement, government investment, guarantees, and strategic government budget spending.All of which are put forward into realization to form trust and help the people in need.
The initial allocation for Covid-19 is Rp405.1 trillion which later is increased to be Rp641.17 trillion in May, increased again to be Rp677.2 trillion then rose again to Rp695.2 trillion and currently the latest is Rp905.10 trillion. This increased allocations have shown us how high the commitment government give into cushioning the impact of Covid-19.
Previously, Ministry of Finance (MoF) has introduced MoF Regulation No.23/PMK.03/2020 (PMK-23) as a tax incentives in response to Covid-19. But, it has been expanded with MoF Regulation No.44/PMK.03/2020 (PMK-44) and expanded again with MoF No. 86/PMK.03/2020 which now expands the list of eligible taxpayers to take advantage of the Article 21 Employee Income Tax (EIT), Article 22 Income Tax on imports, Article 25 Income Tax, and Value Added Tax (VAT) incentives and also introduces an additional incentive for Small and Medium Enterprises (SMEs). Meaning that there will be more tax payers who get the benefits.
The rationale behind these tax incentives are that they are government's efforts to maintain the supply side so that business activities do not stop due to Covid-19. Tax usually is conceived as a burden. That’s why by this tax incentive government hopes to relieve a little of those burdens and give them more space to do business.
The total tax incentive prepared by the government for the business side is Rp123.01 trillion. For Article 21 Employee Income Tax (EIT), Government prepared the total amount of Rp39.66 trillion, Article 22 Income Tax on imports worth Rp14.75 trilion, the total budget for the Article 25 Income Tax installment is Rp14.4 trillion, Value Added Tax (VAT) incentives worth Rp5.8 triliion, a reduction in corporate income tax rates from 25% to 22% with a total incentive value of Rp20 trillion and other stimuli worth Rp26 trillion.
Fortunately, resiliency is still our friend. As expected, the ability to bounce back is not only coming from the government side. In fact, creativity kicks in and finds alternative ways to keep business running. Online businesses have been growing fast and creatively. Therefore, While PEN may have much room for policy discussion for a country could give better results to their citizen, one thing for sure is that government and its citizen must be in the same page to fight for this ultimate goal together.
*) The information and views set out in this article are those of the author and do not necessarily reflect the official opinion of the institution in which the author works.