Jakarta. An expert recently said there are other ways to grow state revenue, including imposing excise on alcohol as the government is set to increase the value-added tax (VAT).

Starting in January, Indonesia will raise the VAT from the current 11 percent to 12 percent in a move to generate higher state revenue. Esther Sri Astuti, an economist at the think-tank Indef, said Sunday that there were many alternatives to a 12-percent VAT hike.

“The government currently needs more money to fund their programs. The easiest option is indeed to boost the tax revenue, but they don’t have to raise the VAT,” Esther said. 

According to Esther, the government can expand its taxpayers by having more firms or individuals in the tax system. Another way to generate public revenue is to transform the informal sector into a formal one. The informal economy refers to activities that have market value and would add to tax revenue if they were recorded. Informal employment includes street vendors, domestic workers, and motorcycle taxi drivers. 

Esther added: “All this time, Indonesia has been dominated by the untaxed informal sector.”

The government can also diversify its source of revenue from goods that are subject to excise. Aside from tobacco, Indonesia should consider imposing excise on other goods such as plastic and alcohol. 

The government should also try to increase the non-tax state revenue, among others, through foreign exchange. Indonesia can maximize the potential of its migrant workers, particularly the professionals. Developing the national tourism sector to attract international travelers can also help raise foreign exchange.

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