Tax, War, and Why We Should Stop It

Oleh: Erikson Wijaya, pegawai Direktorat Jenderal Pajak

In case of war, what may come to mind? Casualties, wreckages, massacres, conflicts, loss, despair, and so on. That is all we know, but at the same time, some aspects are also affected, and they earn less attention than they should. It is money. Countries dealing with war spend more money than those who do not. They reallocated and refocused their budget to fund the war they needed to win. The portion for more crucial programs has to be shifted to weaponries, missiles, troops, and war-related stuff. We can recall the US vs Afghanistan, Ukraine vs Russia, Israel vs Palestine, and Indonesia vs Timor Leste. Those wars require more money and sudden expenditure due to the devastating effects that may emerge. They intrude on the government spending plan, development program, and social welfare.

In 2019, The Center for Strategic and International Studies (CSIS) released a full report on America's military spending and the uncertain costs of its wars. The costs can range from $2,008 to $5,933 billion from Fiscal Year 2001 to Fiscal Year 2019. Reuters (2023) also reported that Russia had doubled its 2023 defense spending target to more than $100 billion, which is equal to a third of all public expenditure, as the costs of the war in Ukraine spiral and place growing strain on Moscow's finances. Over two decades ago, Indonesia raised around $2,10 billion due to the war involving Timor Leste, which ended up with a referendum separating the latter of the provinces. We can also narrate the impairing impacts of war when discussing endless war and conflict in the Middle East, placing Palestine confronting Israel.

Tax Policy Consequences

The tremendous amount of money spiraling into war reveals another hidden truth everyone should know. That wars have been fought with borrowed money. Due to this policy, national debt will rise, and public service will be at stake. War burdens the state budget as an additional and unprecedented cost since the government keeps spending money either in peace or war. This situation leads to potential turbulence in financial balance since the government will face a dilemma between putting aside the tax revenue to fund the war, putting off public interest, and raising tax tariffs to earn more income. The last one is similar to what happens in some developed countries when they increase tax rates to make funding available for war. This becomes feasible since loans may lead to the intervention of another unwanted party.

War has been demolishing many public facilities since the first time it happened. The catastrophic effects it causes continue to take place because the money collected to repair the destruction is often levied through increased tax rates. It takes time since the raise will trigger reluctance and resistance by the people. They forcibly pay the tax to participate in a war that they never expected. This policy choice will never expedite the social welfare scheme or the connectivity among regions through physical construction; instead, it slows both. Unfortunately, a disproportionate increase in tax rates is sometimes just a sign of oppressive policy due to the negative externalities it may create. No proper context justifies using tax to suffice war funding by any country, for good or ill. Here, intentions are essential, and war has none other than to win at all costs.

Above all, tax is just an instrument in a war. Thus, the issue is not solely to put tax in discussion but to consider the existence of war itself. With all tangible and intangible losses, war is not the only solution to any complex problem in a country. Using taxes to fund it will worsen the effect because it takes more time to recover after the war than predicted. War has deprioritized public service and social welfare. The money involved during the war is the money that should be spent for people's interest. In any part of the world, war damages and destroys the possibility of peace. We should curse war and any oppressive act leading to it.

*) This article represents the author's personal views and does not represent the stance of the institution.

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