The role of tax in COVID‐19 response in Indonesia: The principles of flexibility, solidarity, and transparency

Utami, Denita; Ilyas, Wirawan B.

As of October 16, Indonesia currently has the highest fatalities of COVID‐19 in Southeast Asia. Indonesia’s gross domestic product (GDP) is now expected to shrink by 1.5 percent this year. This is largely due to reduced consumption and investment as the results of containment measures that disrupted the activity and mobility of major industries. As taxes account for a significant portion of government revenue in Indonesia, the role of tax is substantial as the primary source of state budget funding for financing the economic response to COVID‐19. This article argues for flexibility, solidarity, and transparency as the principles of tax in the economic policy response of COVID‐19 in Indonesia. Understanding the extent of flexibility, solidarity, and transparency is crucial to adjust state spending and tax policies, and tax compliance is imperative to ensure a viable source of funding to respond to the pandemic.