Tax Restitution: Restoring Rights, Building Trust

“Taxes are what we pay for civilized society.” This remark by Oliver Wendell Holmes Jr. serves as a reminder that tax is not merely a financial obligation of citizens, but the foundation for a state capable of providing education, health, infrastructure, social protection, security, and various public services. In Indonesia, the role of tax is increasingly strategic. Amidst substantial development needs and limited fiscal space, tax revenue forms the backbone of the State Budget (APBN). However, the success of a taxation system cannot be measured solely by the amount of revenue collected. Tax is essentially part of the social contract between the state and society. Citizens surrender a portion of their income because they trust the state will manage it for the public interest. Conversely, the state is obliged to exercise its authority to collect taxes fairly, proportionately, and accountably. Jean-Baptiste Colbert, Finance Minister to King Louis XIV of France, once likened the art of taxation to plucking the goose so as to obtain the largest possible amount of feathers with the least possible amount of hissing. In a modern context, this analogy needs to be read further. The state’s financing needs must not become a reason to collect taxes excessively to the point of reducing the ability of the public and businesses to carry out economic activity. A successful state is not one that can collect the maximum amount of tax, but one that can collect tax appropriately, neither too little nor too much. More than two centuries ago, Adam Smith formulated four taxation principles that remain a reference for modern tax administration: equity, certainty, convenience, and economy. Good taxation must satisfy a sense of fairness, provide legal certainty, be easy for taxpayers to fulfil, and be collected at the lowest possible administrative cost. These principles were later enriched by Richard Musgrave, who explained that fiscal policy has three main functions: allocation, distribution, and stabilisation. Tax is not only an instrument for obtaining state revenue, but also a tool to improve income distribution, correct market failures, and maintain economic stability. In the Indonesian context, the thinking of Prof. Sumitro Djojohadikusumo provides a highly relevant perspective. Sumitro never placed fiscal policy solely as an instrument of state financing. Instead, fiscal policy was seen as a development instrument that must enlarge national production capacity, encourage industrialisation, expand employment opportunities, and increase economic productivity. This view carries a very important implication. The state will not obtain sustainable tax revenue if the productive sector loses its ability to grow. Tax revenue ultimately derives from economic activity. When investment increases, production grows, jobs are created, and corporate profits expand, the tax base will also develop naturally. This is the essence of what might be called Sumitronomics: that fiscal success is not measured by how much revenue is collected today, but by the ability of fiscal policy to enlarge the economic capacity that will be the source of revenue in the future. From this perspective, every tax policy should be evaluated based on one simple question: does the policy strengthen or weaken the ability of the productive sector to grow? The Organisation for Economic Co-operation and Development (OECD) has emphasised in various publications on modern tax administration that tax reform is no longer solely oriented towards increasing revenue. The focus has shifted towards building a sustainable taxation system, one capable of maintaining a balance between the state’s fiscal needs, economic growth, and public compliance. Such a system is built on three main pillars. First, the state obtains sufficient revenue to finance public services. Second, the business world retains room to grow so that the tax base continues to expand. Third, the public has trust in the tax administration so that voluntary compliance increases. The OECD also shows that Indonesia’s tax-to-GDP ratio is still relatively low compared to many other countries. In Revenue Statistics in Asia and the Pacific 2026, Indonesia’s tax ratio was recorded at 11.8 per cent in 2024, far below the Asia-Pacific regional average of around 19.7 per cent and the OECD average of around 34.1 per cent. The low tax ratio cannot be used as a reason to act arbitrarily by blurring the boundary between revenue that is the state’s right and funds that are legally the taxpayer’s right. Precisely because Indonesia’s fiscal space remains limited, this should serve as a basis for the government to build a taxation system capable of enlarging the tax base through economic growth and increased compliance, not by retaining funds that should actually be returned to taxpayers. In this context, restitution is not merely an administrative issue, but one of the instruments for maintaining trust in the taxation system. This is an important point, because in a modern taxation system, trust is fiscal capital whose value is as important as the revenue itself.