Economic Stability: How Do Taxes Affect The Economic Balance in a Country?

“The hardest things to understand in the world is the income tax.” – Albert Einstein (1879-1955)

Tax is a compulsory contribution to the state owed by an individual or entity that is coercive based on the Law with no direct reward and is used for state purposes for the greatest prosperity of the people. The word "tax" in the minds of ordinary people is a mandatory action that needs to be given to both individuals and entities to the state in accordance with applicable rules with the aim of government interests and the welfare of the general public. There is no denying that why should taxes be paid by every citizen? This is intended to impose taxes on the citizen in an effort to maintain and advance the survival of the country's economy. There are 12 types of taxes globally, namely individual income tax, corporate income tax, payroll tax, capital gains tax, sales tax, gross revenue tax, value added tax, excise tax, property tax, personal property tax, land and inheritance tax, and wealth tax. This is the existence of a legal order that regulates all tax regulations for the survival of the state and society.

What is the effect of Taxes in the country?

           It is undeniable that the slogan "wise people obey taxes" has a meaning, namely the existence of an obligation to pay taxes to the state as an effort to defend the state of its citizens. With taxes, the goal is to finance budgets related to development and the interests of a country. Taxes play a role in the country's economic development which includes a budget (budgeter), a regulator (regulator), stability, and acts as revenue retribution. One of the roles of taxes as stability is to stabilize the country's economic condition, where tax revenues are carried out by regulating the circulation of money in the community by collecting and effectively using taxes to suppress the inflation rate. As for data from the World Bank in 2021, the country with the highest tax rate is the United States, amounting to 26 percent of which comes from state and local government taxes. This affects the state system that regulates taxes and public awareness and trust to pay them and will certainly have an impact on the lives of citizens.

Why are taxes on the state so important?

            As mentioned earlier, taxes in the state have a priority, namely the stability or balance of the country's economy. In fact, we cannot deny that the economy in everyday life is very important and influences the life of the country. Based on the type of collecting institutions, the state has 2 tax agency systems, namely state taxes and regional taxes so that the collection is divided by the state and the people pay the taxes according to their distribution. From an economic point of view, the taxes paid by the community to the state will be provided in the form of public goods and services for the needs of the community. As is the case in Indonesia, according to the Ministry of Finance, Sri Mulyani Indrawati in 2022 at shows Pajak Berutur stated that taxes are mutual assistance instruments for the poor and unable to pay, so they are given assistance and support by the government so that they can advance their lives and for those who are able and have economic power, they pay taxes according to their obligations.

How do taxes relate to economic equilibrium?

             International Monetary Fund (IMF) data shows that the global Gross Domestic Product reached 101.56 trillion dollars as of November 2, 2022. In globall, economic growth in Indonesia reached 1.29 trillion dollars, which is the 17th largest GDP in the world according to the IMF. Then how is it related to taxes in Indonesia? We can see from Indonesia's tax growth for 2023, tax revenue reaches IDR 162.23 trillion and 9.44% of the 2023 State Budget target.  The Indonesian state also noted that the 2023 State Budget has a surplus of IDR 243.7 trillion, equivalent to 1.12% of Indonesia's Gross Domestic Product. Therefore, it can be seen that taxes are a balance position that can change because they are influenced by domestic producers offering higher selling prices. Reflecting on the previous year that we do not deny that because the Covid 19 pandemic has affected tax performance in the tax ratio is low. It cannot be covered that the Covid-19 pandemic conditions have caused taxes to be less stable. So that the relationship between taxes and economic balance is very important because the money obtained from the tax sector will experience turnover with various functions, which will help improve society which is important for the economic development of the country.

What are the forms of State efforts that have been and will be carried out regarding taxes in order to maintain the country's economic stability?

            It can be seen from developed countries such as the United States that Joe Biden in 2023 called for that in regulating the United States tax, namely in the form of a tax system, especially marginal income which increased by 39.6% and there was a minimum tax of 25% of the wealth of more than its citizens. Likewise, the State of Indonesia has actually been based on the law on taxes (Law Number 28 of 2007 about General Provisions and Tax Procedures) and its tax mechanism system for the community. The actions taken by this tax system are in the form of self-esteem, namely independent tax management, which is followed by supervision and law enforcement of taxpayers. And other ways from the government are increasing VAT (Value Added Tax) rates, recovering e-commerce taxes, and expanding taxable objects in the form of goods and services. As for what will be done by the Indonesian government, namely at the G20 Summit in 2022 discusses the improvement of tax incentives and mobilization of domestic resources to encourage the country's economic balance internationally.