The Effect of direct tax and indirect tax on gross domestic product of Indonesia :: Macroeconometric model

SIMARANGKIR, Gatot Sukoco, Prof. Osamu Nakamura

2010 | Tesis | S2 Ilmu ekonomi

This thesis examines the effect of direct tax and indirect tax on gross domestic product of Indonesia by using simple macroeconometric model from demand side with data from 1970 to 2008. Furthermore, this study utilizes scenario simulation to investigate the effect of changing of both tax rates on GDP. The purpose of this thesis is to investigate the effect of direct tax and indirect tax on the growth of gross domestic product of Indonesia from 1970 to 2008. Is there any effect of direct tax and indirect tax on Indonesia GDP? Which one will contribute bigger effect on GDP; direct Tax or indirect Tax? Based on these questions, this research was expected to contribute information to fiscal policy maker in order to increase Indonesia GDP growth. This study has found both of taxes have given negative effect on GDP. However, direct tax has had larger effect on GDP than indirect Tax. Furthermore, the effect on GDP was continuously increase from year after year since tax rates was changed. Furthermore, direct tax has played significant role after Indonesia has reformed income tax regulation actively since 1984, specially, in income tax rates and minimum level of income for tax exemption. Although, Value Added Tax has been reformed too, reformation in VAT regulation has been focused more on administration. VAT rate had never been changed. Moreover, price (PGDP) has increased continuously every year, specially, after crisis 1997. The price increasing has made real income decreased significantly. This condition has not followed by adjustment of minimum level of income for tax exemption. The unadjusted of minimum level of income has made low level income become suffer from income tax. Based on these result probably government may increase GDP by reducing direct tax role and more utilize indirect tax. Moreover, government is recommended to adjust minimum level of income for tax exemption every year based on price indicator such as GDP deflator or Consumer Price Index.

Kata Kunci : Direct tax, Indirect tax, GDP