Politics · Indonesia · 4 hrs ago

Hashim Says Up to 40% of Indonesia’s Economy Is Outside the Tax Net

Hashim Says Up to 40% of Indonesia’s Economy Is Outside the Tax Net

Hashim Djojohadikusumo says about 40% of Indonesia’s economic activity is not reached by taxes.

He said the activity takes place in a gray market, where transactions are outside government records.

He cited a World Bank estimate that the gray economy is 35% to 40% of the economy, worth about US$1.5 trillion, and said the bank believes the true share could be as high as 45%.

Hashim illustrated the issue with a barber who comes to his home and does not issue an invoice or collect Indonesia’s 11% value-added tax.

The unrecorded activity means the government misses potential tax revenue.

Electronic tax collection began about one or two weeks ago, Hashim said at a policy forum in Jakarta.

The system is being handled by machines that will collect taxes, state revenue and royalties.

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What people are saying

Hashim Djojohadikusumoadviser to the Prasasti Center for Policy Studies
The World Bank estimates that Indonesia’s gray economy reaches around 35 to 40 percent of the economy, reaching around US$1.5 trillion
via CNN Indonesia
I have my own barber. I am quite fortunate because my barber comes to my house. When I pay for his services, he does not give me an invoice. I pay him without receiving an invoice and he does not collect 11 percent VAT
via CNN Indonesia
The program has now started running about one or two weeks ago. Electronic taxation is now handled by machines. The machines will collect taxes, state revenue, and royalties
via CNN Indonesia