Omnibus Law Taxation Realizes Economic Foundations Towards National Prosperity
By: Angga Kusuma )*
Omnibus law taxation which is now being predicted is becoming the foundation of the economy towards the prosperity of the nation. The reason is, all the rules related to business licensing to investment that is considered to be convoluted will soon be simplified.
Ripple of success began to appear and began to emerge. The implementation of the omnibus law scheme related to taxation is just a matter of time. The draft bill is still undergoing a maturation process in the Indonesian Parliament, hopefully hammered quickly and can be realized soon.
The root of the problem that is suspected of being twisted in economic performance, especially in terms of investment, is the uncertainty of business, one of which is triggered by convoluted licensing. According to the World Economic Forum Report, Indonesia ranks 103rd out of 140 countries, especially in licensing procedures.
Before the financial crisis in 2008-2009, the investment was quite good, even able to grow in double digits, namely 10 to 11%. Meanwhile, after the crisis occurred, investment only succeeded in pinning single digit numbers. In fact, the investment sector is the key to growing sustainably so that Indonesia does not continually rely on debt and taxes. According to the data, investment has contributed around 33% of gross domestic product (GDP), second only to household consumption (55%).
If this is traced, a series of products made by the government in the economic field,
through Omnibus Law, is a powerful move for one major problem namely, the current account deficit. The current account balance is considered to be the “heart” that affects the economy as a whole. Since 2012, Indonesia’s current account has begun to record a deficit due to the commodity bonanza.
And from that moment on, the growth which, after the financial crisis, was only able to survive at the level of 6%, actually dropped at the 5% level. The Targets of the Tax Omnibus Law itself are reported There are two Laws that will be discussed by the government with the DPR, namely the Draft Work Bill (RUU) and the Tax Draft Provisions and Facilities for Strengthening the Economy (Omnibus Law Taxation).
This Omnibus Taxation Law covers seven substances that regulate tax regulations at the central level, and still adds two substances related to the adjustment of regional tax rates and regional levies (PDRD) including reconfiguring local government authority. At the central level, incentives are distributed to all types of taxes, ranging from the gradual reduction of Corporate Income Tax rates in 2022 and 2023, the elimination of income tax on dividends from home and abroad which are invested in Indonesia, to a number of tax facility arrangements such as tax holidays , superdeduction tax, along with incentives for special economic zones (KEK).
The Omnibus Law Taxation is present as one of the legal instruments to resolve this issue. Indonesia needs even greater investment. In addition to covering the current account deficit, foreign investment can also boost economic growth up from a figure of 5%. Meanwhile, investment performance can be measured through the Incremental Capital Output Ratio (ICOR). This is the additional capital needed to produce an additional 1 output of production.
It is said, the higher the ICOR, the more inefficient a country’s economy will be. ICOR Indonesia itself is among the highest at the peer level, which is 6.3%, this figure is still less compared to Malaysia (4.6), the Philippines (3.7) and also Vietnam (5.2). In other words, in order to accelerate to 6%, the investment needed is up to 37.8% of GDP.
The complexity of investment related to licensing can cover medicines, textiles, steel, and petrochemicals. Interestingly, the tax holiday facility has been successful in attracting investment, one of which is in the petrochemical field. In the future, the hope of importing petrochemical inputs can be pushed to under 50%.
If the various complexities related to taxation can be decomposed it will potentially ease other problems. Because, this Omnibus Law is indeed interconnected and also continuous. Success in one sector will then boost other sectors to be able to move up to a more qualified level. So, now there is no more reason not to support the Law on this broom, right? Regeneration of rules to pruning for a number of rules which are considered to be hindering will soon be realized to realize the foundation for the prosperity of the Indonesian people. Mari, dare to advance and become a new Indonesia that is more shot in the eyes of the world.