Tax is a mandatory contribution collected from individuals or companies by the state according to applicable regulations. Almost all countries tax their citizens. This is because taxes are the main source of revenue for the government in financing all state expenditures, including development.
According to worldbank.org, the government's efforts to collect taxes and other levies are a fundamental way for countries to generate income that enables them to finance investments in various sectors. This includes the development of infrastructure, people, and the provision of services for citizens and the business world. In general, the function of taxes is to finance the needs of the state for the greatest benefit of the people.
The role of taxes was more than just that, though. According to pajak.go.id, Indonesia has at least four tax functions to achieve equitable and sustainable development targets.
As the main source of state income, taxes serve to finance a number of state expenditures. Because in conducting routine state tasks and also carrying out development, large costs are needed. These costs are obtained from tax revenues. So far, the income from taxes has been used for several regular financial needs, such as personnel expenditure, goods expenditure, maintenance, and so on.
In terms of financing for development, the money is obtained through government savings, specifically domestic revenues minus routine expenditures. From year to year, government savings must always be increased. This is because the need for development financing continues to grow.
In the regulatory function, taxes can be used as a tool to achieve a goal for the welfare of the people. With this function, the government can encourage the domestic economy, including by encouraging investment, both domestic and foreign, through the provision of incentives or tax relief. In addition, in an effort to protect domestic industries, the government can use tax policies such as setting high import duties for products from abroad.
The existence of taxes as a source of state revenue can also be used to carry out policies related to efforts to maintain economic stability, including overcoming inflation. To control inflation, the government can impose high taxes, so that the money supply can be reduced.
Income Redistribution Function
As the largest source of state revenue, taxes have a role in income distribution. Taxes that have been collected by the state will be used to finance all public interests, including development. As a result, it will create jobs for the community. The use of taxes for job creation will increase employment. In this case, there is a redistribution of income from taxpayers to workers who are deployed by the government so that it leads to an even distribution of income.
By understanding the importance of the tax function in development, it is hoped that the level of public awareness to carry out their tax obligations can also increase. (Ken)