THE IMPACT OF TAXATION ON INCOME DISTRIBUTION: EVIDENCE FROM INDONESIA

Kunta Nugraha and Phil Lewis ()
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Kunta Nugraha: Centre for Labour Market Research, University of Canberra, ACT, Australia
Phil Lewis: Centre for Labour Market Research, University of Canberra, ACT, Australia

The Singapore Economic Review (SER), 2013, vol. 58, issue 04, 1-18

Abstract: The Indonesian economy has grown significantly since 2000, but income inequality has increased since 2001. One of the possible government tools to improve income inequality is through taxation. This paper evaluates household income, income tax, taxes on production, and their impact on income distribution. The major data sources are the National Socioeconomic Survey and the Input–Output Table. The key finding is that income tax only slightly improves income distribution, but taxes on production worsen income distribution. The other important finding is that both forms of taxation are regressive, especially for lower and middle income household. The results suggest that Indonesian taxation worsens income inequality.

Keywords: Income tax; income distribution; taxes on production; H20; H22; H23 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (4)

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DOI: 10.1142/S0217590813500240

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