I have sometimes wondered whether making ordinary people here pay tax might encourage them to be more assertive when it comes to public services etc they feel they're paying for. Otherwise they figure corruption is just the theft of money which had no obvious origin anyway (aid/debt, etc). Be interesting to see over the next year.
The number of personal income taxpayers who will file their annual tax returns before the end of March (the deadline for the 2008 income tax payments) will most likely exceed 10 million. About 8 million of them will be first-time filers, individuals who voluntarily registered themselves as taxpayers to take advantage of the benefits granted to citizens with taxpayer identification cards (NPWP).
The dramatic increase in the number of registered income taxpayers is the result of the massive tax campaign last year and the great incentives offered to people with an NPWP, including exemption from the Rp 2.5 million (US$227) exit tax for overseas travel and amnesty from administrative fines for tax return adjustments for 2007 and earlier.
At present, those without an NPWP will find it almost impossible to make business transactions, including buying motorcycles, cars, homes or jewelry worth more than Rp 100 million. Another advantage is that those with an NPWP are subject to income tax rates much lower than those imposed on unregistered taxpayers.
Certainly the steep increase in the number of people now falling under the national income tax net will cause not only administrative consequences, with the tax office suddenly having to process such a huge number of tax return forms.
But this development will also exert a political impact because more and more citizens will see themselves not merely as common people or the "governed ones", but as taxpayers who pay the government and its employees and who will most likely demand stronger influence in decision making.
Administratively, the workload of the taxation directorate general will increase sharply as newly registered taxpayers still need to be encouraged to comply voluntarily with their tax obligations by regularly filing their tax returns. Taxpayers should be educated to understand that filing tax returns is neither complex nor costly.
However, voluntary tax compliance also will increase if the cost of tax evasion and nonfiling of tax returns is very high. People will fulfill their tax obligations if they know their chances of being caught by tax officials and auditors is very big.
It is comforting to learn the tax office is fully prepared with a much bigger administrative capacity to serve a large number of taxpayers and has developed a strong law-enforcement system.
But as empirical evidence from developed countries and emerging economies shows, there is a close relationship between taxation and democracy. Put another way, there is no taxation without representation, because citizens will demand something in return for increased taxation. This "something" could be better public services or demands for greater influence in political decisions.
Their democratic right provides them access to information on the amount of resources going to which programs in which areas.
The government's dependence on tax rupiah from the people (earned income) fosters interaction between the state and society, making the government more responsible to its citizens. Moreover, the interaction tends to strengthen demand for improved accountability of government institutions.
Hence state dependence on local taxation will raise accountability among politicians and decision makers.
The rationale is that as long as the government is still perceived to be quite lax in combating corruption, thereby letting taxpayer money go to waste, there will be no significant improvement in the attitude and motivation of the public to voluntarily pay their taxes.
Hence voluntary tax compliance is also influenced by the taxpayers' perception of the integrity of tax officers and the government's credibility with regards to governance practices.
Otherwise, taxpayers might simply ask themselves, "Why do we have to pay taxes if most of the money eventually ends up in the pockets of corrupt officials?"
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