EVERY year on July 14, National Tax Day is commemorated. This commemoration aims to increase public awareness regarding taxes for the sake of the sustainability of the country.
So, what is tax? What is its history? And what are the purposes and functions of tax? Now let’s see the explanation.
Definition of Tax
The word “tax” comes from the Latin word “taxo” which means a mandatory contribution paid by the community for the benefit of the government and the community itself.
According to Law Number 28 of 2007, Article 1 Paragraph 1, Tax is a mandatory contribution to the state made by individuals (private persons) or bodies which is mandatory based on the law and does not receive direct compensation and is used for state needs for the greatest prosperity of the people.
So, tax can be interpreted as a contribution paid by the community to the state treasury which is mandatory. Where they refuse or avoid taxes is basically a violation of the law, because tax is a mandatory activity that must be collected based on the provisions of the law.
The rewards received by taxpayers will not be felt directly, but rather through facilities built by the government for the community.
Also read: The Public Needs Tax Consultant Services with Integrity
History of Taxes in Indonesia
Taxes have been known since the archipelago was ruled by various kingdoms and sultans who experienced ups and downs throughout its long history. The kings of the archipelago collected taxes and tributes from the people to support their kingdoms in organizing royal administration, building and maintaining infrastructure, and organizing religious events.
The related taxes range from property taxes, forestry products to prostitution and performing arts. In addition, the tax collection system is one that collects taxes in a simple way, there are also those that use an organized and structured tax collection system.
Furthermore, when the Netherlands and Europe entered the colonial period, taxes began to be imposed. The taxes that apply include housing tax, business tax, merchant tax and land rent tax, which were imposed in 1839.
Also read: 12.7 Million People Have Reported Annual Tax Returns
Then, the existence of this system gave the people a heavy and burdened feeling. Moreover, when there was no clarity and many violations committed by the colonial government at that time.
In 1885, the Dutch colonial government differentiated tax rates based on the taxpayer’s nationality. For example, the government imposed a 4% tax increase on Asian citizens.
After that, during the independence period, taxes were included in Article 23 of the 1945 Constitution at the BPUPKI session. The article clearly states that all taxes paid to the state are based on law.
Also read: Directorate General of Taxes Wins Platinum Winner PR Indonesia Awards 2024
Although it has been regulated in law, the Government has not been able to announce a special law governing taxation. This is due to the Dutch military aggression and the relocation of the capital by the Indonesian government to Yogyakarta. In addition, the wheels of government and financing of state expenditures must continue to turn.
Next, the government issued a number of regulations regarding colonial government inheritance taxes. Such as the Income Tax Law of 1944 and the establishment of a number of units to carry out tax collection including the Tax Office, Customs and Excise Office and the Agricultural Product Tax Office at the Directorate General of Monetary. In a modern economy, taxes are the most important source of government revenue.
Taxes are different from other sources of income because they are mandatory and have no limits. Usually, tax revenues are returned to the community in other forms. This can be done through public services, infrastructure development, or community welfare.
History of National Tax Day
National Tax Day was first commemorated on July 14, 2018. This commemoration was established based on the Decree of the Director General of Taxes No. KEP-313/PJ/2017 dated December 22, 2017 concerning the determination of tax day. The determination was an important moment in the history of taxation in Indonesia.
In addition, this celebration is also intended to honor the history of the nation’s struggle, strengthen the identity of the DJP organization and increase the devotion of DJP employees to the country.
This National Tax Day celebration refers to the word tax that appeared in the “Second Draft Constitution” submitted on July 14, 1945 in chapter VII on Finance. Article 23 point two clearly states “All taxes for state purposes are based on law”.
Since then, the issue of taxes has been included in the 1945 Constitution. In fact, taxes became a special topic of discussion following independence, namely on July 16, 1945, which detailed that taxes were the main source of the state.
Purpose and Function of Tax
The purpose of tax collection is to increase state revenue as much as possible and support government policies in increasing investment, competitiveness, and public welfare. While the function of taxation is divided into four, namely:
1. Budget Function
As a source of state revenue, taxes have the function of financing state expenditure, such as carrying out current state tasks and achieving developing achievements.
Taxes paid by individuals and businesses can be used by the state to fund routine expenses, such as employee costs, property costs, maintenance, and so on. While in terms of financing development, the expenses used can come from government savings, namely domestic income minus routine expenses.
On the other hand, tax collection means community participation in national development.
2. Regulating Function (Regulerend)
The government can regulate economic growth through taxation policies. Having a regulatory function, taxes are used as a tool to achieve goals. For example, to increase the rate of investment, both domestic and foreign, the government offers various forms of tax reductions.
Another example, to protect domestic production, the government sets high import tariffs on foreign products.
3. Stability Function
The existence of taxes helps the government have the capital needed to implement policies related to price stability, in order to control inflation. This can be done by regulating the circulation of money in society, tax collection, and the use of taxes effectively and efficiently.
4. Income Redistribution Function
Taxes collected by the state will be used to fund all public interests, including funding development that can open up employment opportunities, which can ultimately increase people’s income.
That is the meaning, history, purpose and function of tax. Tax is one of the sources of state revenue, so it is expected that taxpayers can fulfill their tax payment obligations effectively and comfortably. (Z-3)
#July #Commemorates #Tax #Day #Definition #History #Purpose #Function
