Tax Buoyancy in Indonesia: An Evaluation of Tax Structure and Policy Reforms

Suhut Tumpal Sinaga (), Mahjus Ekananda, Beta Yulianita Gitaharie and Milla Setyowati
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Suhut Tumpal Sinaga: State Finance Polytechnic of Stan, Kota Tangerang Selatan 15222, Indonesia
Mahjus Ekananda: Department of Economics, Faculty of Economics and Business, University of Indonesia, Depok 16424, Indonesia
Beta Yulianita Gitaharie: Department of Economics, Faculty of Economics and Business, University of Indonesia, Depok 16424, Indonesia
Milla Setyowati: Faculty of Administrative Sciences, University of Indonesia, Depok 16424, Indonesia

Economies, 2023, vol. 11, issue 12, 1-18

Abstract: This study investigates tax buoyancies in Indonesia. It analyzes the cointegration relationship between the regional gross domestic product (RGDP), along with several control variables, and tax revenues. Focusing on personal income tax (PIT), corporate income tax (CIT), and value-added tax (VAT), it employs a dynamic analysis from 2015 to 2021. This research utilizes the Wald test to evaluate long-term buoyancies and the PMG-ARDL model to assess tax dynamics and cointegration coefficients. The results revealed tax revenues’ consistent tendency toward equilibrium in the long term, with fluctuations across Indonesian provinces. PIT displayed the highest buoyancy and adjustment speed, followed by VAT and CIT. This analysis highlights tax types’ diverse responses to underlying factors, offering crucial insights into fiscal dynamics. The research illuminates the intricate relationship between economic indicators and tax categories, providing valuable lessons for future policies, especially concerning structural changes like tax amnesty programs and tax rate modifications.

Keywords: tax buoyancy; tax structure; tax policy; panel ARDL; Indonesia (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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