The impact of the Indonesian income tax reform: A CGE analysis
Author(s)
Amir, H.
Asafu-Adjaye, John
Pham, Tien Duc
Griffith University Author(s)
Year published
2013
Metadata
Show full item recordAbstract
This study evaluates the impacts of Indonesia's recent income tax reforms on key macroeconomic variables, as well as the impacts on poverty and income distribution. It was found that the reductions in personal income tax and corporate income tax increase economic growth under a balanced budget assumption. The policy reforms also lead to a small reduction in the incidence of poverty. However, the policies also lead to an increase in income inequality because the tax cut is more beneficial to households in the highest income categories. It is recommended that future tax cuts should target the urban and rural poor.This study evaluates the impacts of Indonesia's recent income tax reforms on key macroeconomic variables, as well as the impacts on poverty and income distribution. It was found that the reductions in personal income tax and corporate income tax increase economic growth under a balanced budget assumption. The policy reforms also lead to a small reduction in the incidence of poverty. However, the policies also lead to an increase in income inequality because the tax cut is more beneficial to households in the highest income categories. It is recommended that future tax cuts should target the urban and rural poor.
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Journal Title
Economic Modelling
Volume
31
Subject
Public Economics- Taxation and Revenue
Applied Economics
Econometrics
Banking, Finance and Investment