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The impact of the Indonesian income tax reform: A CGE analysis

Hidayat Amir (), John Asafu-Adjaye () and Tien Ducpham

Economic Modelling, 2013, vol. 31, issue C, 492-501

Abstract: This study evaluates the impacts of Indonesia's recent income tax reforms on key macroeconomic variables, as well as the impacts on poverty and income distribution. It was found that the reductions in personal income tax and corporate income tax increase economic growth under a balanced budget assumption. The policy reforms also lead to a small reduction in the incidence of poverty. However, the policies also lead to an increase in income inequality because the tax cut is more beneficial to households in the highest income categories. It is recommended that future tax cuts should target the urban and rural poor.

Keywords: Indonesia; Tax reform; Economic growth; Poverty; CGE analysis (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:31:y:2013:i:c:p:492-501

DOI: 10.1016/j.econmod.2012.12.018

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