Does Tax Revenue Align with Economic Growth?

Based on the Central Government Financial Report (LKPP), "tax revenue" is the accumulation of state revenue from income tax (PPh), value-added tax (PPN), land and building tax (PBB), excise revenue, international trade tax, and other taxes.

However, the growth rate of Indonesian tax revenue does not always correlate with national economic growth.

One example is the 2007-2008 period.

According to data from the Ministry of Finance, in 2007 the growth rate of Indonesian tax revenue reached 19.99% (year-on-year/yoy), then strengthened to 34.16% (yoy) in 2008.

On the other hand, Indonesia's economic growth in 2007 reached 6.35% (yoy), but weakened to 6.01% (yoy) in 2008.

A similar situation occurred in 2010-2011, where the growth rate of tax revenue strengthened, but national economic growth weakened.

There was also another case that occurred in 2015-2016. At that time, tax revenue growth weakened, but economic growth strengthened, as seen in the graph.

Although its growth rate is not always consistent, tax is estimated to still have a positive influence on economic growth.

This is recorded in a research report by Estro Dariatno Sihaloho, a lecturer at the Department of Economics, Padjadjaran University, entitled "Analysis of the Influence of Tax Revenue on Indonesian Economic Growth: A Vector Autoregressive Approach" (Journal of Economic Forum, 2020).

Estro Dariatno Sihaloho researched various Indonesian macroeconomic data from 1970-2010. He also found that certain types of taxes have a strong contribution to national economic growth.

"The estimation results show that income tax has a positive and significant influence on government revenue and Indonesian economic growth," wrote Estro in his report.