The Value of Tax Expenditure is Not Comparable to The Increase in Investment

Wednesday, 24 August 2022

The Value of Tax Expenditure is Not Comparable to The Increase in Investment

JAKARTA. In the 2023 State Budget and Expenditure Draft (RAPBN), the government estimates that tax expenditures will amount to IDR 309.7 trillion. This figure increased by 22.7% from the realization of tax expenditure in 2020 which amounted to IDR. 252.4 trillion.

Quoting Bisnis Indonesia Tuesday (23/8), the increase in tax expenditure is predicted, because the use of incentives will increase as a result of business activities starting to kick in. 

However, not all tax expenditures are issued by the government to increase investment.

Read: Minister of Finance Hands Over Tax Holiday Granting Authority to Boom

In addition, there are at least four objectives of providing tax expenditures such as supporting the business world, developing Micro, Small, and Medium Enterprises (MSMEs), and improving people's welfare.

Low Growth Investment 

Specifically for tax expenditures aimed at improving the investment climate, in 2020 the realization is estimated at IDR 28.58 trillion. This number increased by 10.67% from the realization of tax expenditure to enhance the investment climate in 2019.

Then last year, the realization of tax expenditure to improve the investment climate was recorded to be up 14.21% from the realization in 2020. Meanwhile, the realization of investment throughout 2021 was recorded to only grow 8.91% to IDR 826.3 trillion.

If we compare the tax expenditure with the realization of investment, it appears that there is an imbalance. This means that the growth in tax expenditure is much higher than the realization of investment.

Tax Holiday is The Most Popular Incentive 

Several tax incentives that have been included in the tax expenditure category include tax holidays, tax allowances, investment allowances, and super tax deductions.

However, only tax holidays and tax allowances are the most popular among the business actors.

Throughout 2021, 23 taxpayers have applied for a tax holiday, 17 taxpayers have applied for a tax allowance and three taxpayers have applied for an investment allowance.


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