The Robin Hood and The Tax Warriors: Robbing from the Rich and Giving to the Poor

By Rizal Abdi Prabowo, Employee of the Directorate General of Taxes

It was Monday afternoon when I was at my office, I received a phone call from my sister. She was telling me that my mother had been allowed to leave the hospital by the doctors. Previously speaking, my mother had had a surgery for her appendix and was hospitalized for more than a week.

In one hand, I was glad because my mother was alright and getting recovered from her ill. But in the other hand, I was a little surprised by the cost of the hospital treatment which is quite high. For a surgery and a more-than-one-week hospital treatment, it costs as much as tens of millions of rupiahs, though roughly it is no more than 30 million rupiahs.

As we didn’t expect the cost would be that much, we were looking for any ways to reduce the cost. After consulting to the administration of the hospital,we were suggested that we contact the BPJS Kesehatan (a government health insurance program) to take care of the cost.

At first the BPJS only agreed to bear very little budget, because they argued that my mother was in a VIP room (it’s not the best class, but slightly higher than the economy class). My father was a little desperate until he came to the BPJS office for the second time and met the boss in his room. I didn’t know what my father argued but when he came out of the room, he smiled. And yes finally the BPJS had agreed to bear the budget as much as 50% of the total budget. It was such a huge amount of money. Even the 50% of it is still counted as much as tens of millions of rupiahs but the BPJS was kindly willing to pay for it. I was soooo grateful.

As I was feeling so grateful, I had something in my mind. How can the BPJS pay for all the health costs? Where do the BPJS get the money? Well, the BPJS is a public service institution that carries out the government health insurance program. It gets the money from the insurance premium. The insurance premium is paid by the people and the government. For instance, the insurance premium for civil servants is 5% of the total monthly salary, 2% is taken from the salary while the rest 3% is paid by the government. For those who are very very poor people with certain criteria by the social department, they even don’t have to pay the insurance premium at all because all the premium is fully paid by the government.

The BPJS is just one of the government programs (government spending expenses), as there are many others like in educations, healthcare, infrastructure, and even like the military upgrades.When it comes to government programs, where do you think the government gets the money to run its programs? Well, aside from the debt (which many people are now concerning about), almost 70% of the total government budget comes from taxes. Taxes vary from land-building tax to value-added tax and income tax, but so far, the income tax contributes most of the total government tax revenues.

Current Problems: The Gini Coefficient & The Inequality of Income Distribution

In addition to supporting the government tax revenues, taxes are also used as a way to reduce the inequality of income distribution.The inequality of income distribution is a condition where there is a huge gap between the rich (high income per capita) and the poor (low income per capita). It is a major problem among developed countries, especially Indonesia. The income distribution is measured with a Gini Coefficient. Gini Coefficient ranges from number 0 to 1. Indonesia itself has the average of Gini Coefficient from 0.38 to 0.41 from the year 2010 to 2013, which is considered high compared to the other South East Asian countries.

Coefficient of 0 means all national income/wealth are distributed evenly to all residents of a country (perfect equality), while coefficient of 1 means that all national income/wealth are only owned by one single person (perfect inequality). The more the coefficient approaches toward 1 it means that the total income/wealth in a country is only owned by a few groups of people, causing a huge gap between the rich and the poor.

For instance, according to SWA Magazine Survey in year 2013, the top CEOs salary in Indonesia (representing the rich people) ranges from 5 to 7 billion rupiahs per month. Again, it’s billion not million and again it’s per month. Then, do you know how much the average salary for the labors / blue collar workers in Indonesia? It ranges only from 3 to 7 million at best per month. Look at the comparison, a few groups of people are getting billions per month, while millions of other people are getting only millions.

It’s easy for those rich CEOs to get a Louis-Vuitton purse for 7 million rupiahs, but for the labors that money can be used to live and feed his family for the whole month. Instead, the labors should work very hard to get the money of 4 to 6 million rupiahs for their baby birth at the hospital with very minimum facilities, while the rich CEOs can just spend that money only for a skin-beauty treatment.

In Indonesia the number of the top-richest people is approximately thousands of people, while the number of the poor is approximately hundreds of millions of people. Now, do you see the gap of the income distribution? It’s obvious.The very-high income is only enjoyed by a few groups of people, while the low income is distributed among the rest of the millions of people. If you ever look around Jakarta, you will see hundreds of fancy luxurious cars, houses and apartments. Question: who do you think own those things? Only a few groups of people do, of course. But what about the other millions of people? The other millions of people have to share their small 4x10-meter-square-rented house with 4 or 5 family members inside.

The Robin Hood

To reduce the gap of income, the government needs to build a system that can transfer the wealth from high income people to low income people. Have you ever heard of the Robin Hood, a legend from England who rob the rich and give it to the poor? Or Si Pitung, a jagoan from Betawi who steal money from the rich-Dutch VOC and hand it over to local people? Well, here in Indonesia we have the Directorate General of Taxes (DGT), a government institution which its main duty is to collect taxes. The basic idea is to take some money from the rich and give it back to other people in a form of healthcare, educations, infrastructure, and other social programs.

To be as fair as possible, the government has levied progressive income tax rates since the first Income Tax Law in 1983.Progressive means the more income you get, the more taxes you have to pay. It works the other way around too. With this progressive rate, the income tax will never and should never be a burden for the taxpayers.

The income tax is not designed to make the taxpayers broke. There is no excuse that the income tax will cause you a lot of financial loss. Let me give you some examples. If you’re an employee, not married, and have salary of 5 million rupiahs per month, based on the newest non-taxable income (PMK 122/2015) your income tax is -more and less -only 87.000 rupiahs per month.With the same conditions, if you have salary of 30 million rupiahs per month, your income tax is -more and less- only 3 million rupiahs per month.

Another example would be, if you run a business with the total gross profit less than 4,8 billion rupiahs a year, then you are eligible to pay a final tax(PP 46/2013) of only 1% of total gross profit per month. So when you sell one portion of Nasi Goreng in a restaurant which cost around Rp10.000 each, the tax is only Rp100. It’s such a small number that maybe the onions on your Nasi Goreng cost more than the tax itself.

So now we realize that the taxes only take a small portion of your total income and will never cause you financial loss, I encourage all taxpayers to file the tax reports and pay the taxes right away.In this year of 2015, the Directorate General of Taxes (DGT) are given tax revenue target as much as Rp 1.294 trillion rupiahs. It’s such a lot of money and of course not an easy task to accomplish. Let us all together support the DGT and let us not criminalize nor even bring down the image of the institution. Indeed, right now the DGT really needs support from all the taxpayers and the stakeholders to accomplish the target.

In this modern era, the best contribution that you can give to your country is by paying taxes. You don’t have to go to a battlefield fighting with guns, nor climbing the flagpole and tearing the blue part of the Dutch-VOC flag, as seen in the heroic incident in Hotel Yamato - Surabaya in 1945. You simply need to pay the taxes. That’s all.

One more thing, when you pay the taxes, don’t ever feel that you won’t do anything good. Always remember that when you pay the taxes, the small amount of your money will indirectly help those poor people get to pay for their healthcare and their children school fees, you help those poor farmers get cheap fertilizers, you help those poor fishermen get cheap fuel for their boats, you help those people in Nusa Tenggara get electricity and water, you help those people in Papua get smooth roads, and many other praiseworthy benefits for human life.

*) 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.