Freedom or death!  This is not only the slogan of the struggle of the Indonesian people—especially Surabaya—when fighting against the invaders 76 years ago. 

This exclamation is even more relevant from time to time. Especially in the midst of a multidimensional crisis due to the current Covid-19 pandemic. Freedom is becoming scarce, as death is getting more and more familiar to the ear. 

August, which is usually a special moment to celebrate Indonesia's independence day, since the last two years there is no more excitement. 

People's parties which are usually held all over the country, have now been replaced by the mourning of the people who are constantly left behind by their relatives. 

In addition to the countless deaths and sick people, the pandemic has caused many companies to close down, millions of workers were laid off and lost their income. 

Instead of avoiding the middle income trap, Indonesia was caught in the trap.The indicator is Indonesia's Gross National Income (GNI) per capita, which fell from USD4,050 in 2019 to USD3,870 in 2020). 

Indonesia also has to be willing to downgrade to become a lower middle-income country.  

This led to hope in the first half of 2021, following an annual growth of 3.1% in the national economy. The exact turning point occurred in April-June when the economy surged by 7.07%. 

Unfortunately, the good news came amid the second wave of the Corona pandemic, which is more contagious and destructive than ever before. Although statistically Indonesia has managed to escape the recession, in reality it has not been completely free from the economic crisis. 

As a result, the economic acceleration during April-June is like a false hope that only creates temporary euphoria. 

Moreover, the positive note was created because the basis for comparison was a fairly deep economic contraction in the second quarter of 2020 (minus 5.32%). 

Fiscal Credibility  

To prevent further economic decline, the government has poured in various tax incentives and social assistance. 

The economic stimulus budget is quite huge, reaching IDR 695.2 trillion in 2020 and IDR 688.43 trillion in 2021. Not only that, the vaccination program was also intensified with a total allocation of funds of IDR 58.11 trillion. 

All these extraordinary efforts proved effective in boosting pace of the economy. This can be seen from the role of government spending which has increased significantly in the formation of Gross Domestic Product (GDP). Even though we know there are leaks and again some of them are due to corruption. The consequence of this countercyclical fiscal policy is that the fiscal deficit swelled to two times wider than what the State Finance Law has so far allowed (3% of GDP). 

In other words, seeking large amounts of debt is again the government's choice at a time when state revenues are running low to cover the increasingly bloated spending needs. 

The Ministry of Finance recorded that the government debt position as of the end of June 2021 reached IDR 6,554.56 trillion. That amount is almost six times the capacity of the state budget or 41.35% of GDP. ? 

However, even being in debt does not mean that there are no challenges in a crisis situation like we are facing now. The pandemic also seems to limit the government's cheap financing source. To the extent that the Government must lobby Bank Indonesia (BI) to share the debt burden (burden sharing) in order to maintain fiscal sustainability and financial sector stability. 

According to the agreement with the government, the Central Bank must absorb or purchase government bonds at a maximum of 25% of the auction target. This scheme places BI as the largest buyer of government bonds in 2020, reaching IDR 601.7 trillion or 53.8% of the total issuance of government debt papers. 

Despite the risk to its balance sheet, BI is committed to continuing the burden sharing scheme until 2022. For this reason, BI has allocated funds of up to IDR 439 trillion to absorb government bonds of IDR 215 trillion in 2021 and IDR 224 trillion in 2022. This confirms the limited fiscal capacity to cope with the current multidimensional crisis. 

Meanwhile, in terms of revenue, tax payments to state treasury seem to be increasingly depressed by restrictions on social and economic activities of the community. Although it's actually no secret that tax shortfalls are a recurring problem every year—with or without a pandemic or economic crisis. 

As an illustration, the realization of tax revenues in 2020 was IDR 1,072.1 trillion or only 89.4% of the state budget target. In other words, there was a shortfall of IDR 126.7 trillion. The decline in social and economic activities of the community made tax payments last year contracted 19.6% compared to the realization in 2019. Meanwhile, in the first semester of this year, the tax payment received by the government was only IDR 557.7 trillion or 45.36% of the target of IDR 1,229.6 trillion in the 2021 State Budget. 

This result makes the fiscal authorities need to recalculate by making more realistic tax revenue projections.The government estimates that the 2021 tax revenue target may only be achieved by around 92.9% or IDR 1,142.5 trillion by the end of the year. 

Tax Resolution 

With the change of years and age, Indonesia needs to redesign the country's budget management solutions. Especially in overcoming tax shortfalls and reducing dependence on debt. 

There are several things that we need to pay attention to from this tax shortfall. First, the economic slowdown causes people's purchasing power to decline, company profitability plummets or even many lose money and go bankrupt, as well as many workers are laid off and lose their income. 

The measures taken by government to provide social assistance and various tax incentives need to be appreciated. It is a proof that the State is present and does not remain silent. Although the provision of these excessive incentives has a serious impact on the contraction of tax revenues in recent years. 

The question is, how effective is the tax incentive policy in encouraging economic activity and investment? For this reason, strict evaluation and supervision is required considering that not all fiscal facilities are used properly by taxpayers. 

On the other hand, the low tax base and the problem of taxpayer compliance are also classic issues. Therefore, the intensification and extensification policies, as well as the simplification of the tax system need to be encouraged and accelerated. 

The expansion of the tax base is mainly aimed at economic sectors that have not been explored and touched by the system (underground economy).The revival of the digital industry can be a potential source of new tax revenue in the future. 

In addition, the government also needs to pay attention to tax policies that have the potential to increase the burden on society and the business world. Especially related to less competitive tax rates and tax objects that have the potential for double taxation. 

Modification of the Double Taxation Avoidance Agreement (P3B) through the multilateral instrument on tax treaty (MLI) appears to need to be accelerated, as well as optimizing the exchange of financial information between jurisdictions. 

Legal certainty, licensing, security, and business continuity are equally important to taxpayers. Therefore, policy deregulation through the Omnibus Law scheme must also be able to answer all of those things.  

Do not let there be any more articles that are multi-interpretation and provisions that are discriminatory or unfair. Because the difference in interpretation and implementation of this regulation always consumes energy, time, and costs of disputes that are more expensive, both for taxpayers and tax authorities. 

In essence, policy resolutions must be comprehensive and touch the root of the problem so that they do not always change every time the government changed. Get rid of economic 'comorbidities' and no more budget abuse so that efforts to alleviate pandemics and crises by being in debt don't end up in vain. 

Let's keep an eye on the  government policies and unite against the pandemic. 

Disclaimer! This article is a personal opinion and does not reflect the policies of the institution where the author works.