CHAPTER 1

INTRODUCTION

1.1.Background of the paper

Taxes are one of the sources of state cash income used for development with the

ultimate goal of people's welfare and prosperity. Therefore, the tax sector plays an

important role in the development of the welfare of the nation. However, it is undeniable

that it is difficult for the state to collect taxes because the number of taxpayers who are

not compliant in paying taxes is a challenge in itself. The government has granted

concessions by giving advance warning through Tax Returns (SPP).

However, there are still many taxpayers who are negligent to pay taxes, not even a

few who tend to avoid these obligations. This encourages the government to create a

mechanism that can provide coercive power for taxpayers who do not obey the law. One

such mechanism is gingerbread or forced coercion of the body. "The existence of this

institution is still controversial. Some people think that the imposition of Paksabadan is an

exaggeration.% On the other hand, there is also an opinion that this institution is needed

to provide a potential deterrent in dealing with naughty taxpayers.

1.2.Problem formulation

a. What is the taxation law and legal basis?

b. What is the tax functions?

c. What is the tax grouping?

d. How about taxation in indonesia?

1.3.Purpose of the paper

a. Knowing the taxation law and legal basis

b. Knowing the tax functions

c. Knowing the tax grouping

d. Knowing about the taxation in indonesia

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 CHAPTER II
DISCUSSION

1. Taxation Law and Legal Basis

One of the taxation laws in Indonesia is as stipulated in Law Number 16 of 2009. In that
article the general provisions and procedures for taxation are stated, namely:
1. Contributions to the state by individuals and entities are coercive
2. The contribution will be used for the needs of the country with the aim of people's
prosperity.
In addition to Law Number 16 of 2009, there are other legal bases which form the basis
fortaxation:
1. The General Provisions Law on Tax Procedures is Law No. 16 of 2000
2. Income Tax Law, Law No. 17 of 2000
3. Value Added Tax on Goods and Services and Sales Tax on Luxury Goods in Law No.
18 of 2000
4. Land and Building Tax Law No. 12 of 1994
5. Law on Tax Collection with Forced Letters, contained in Law No. 19 of 2000
6. Tax Court Law, Law No. 14 of 2002
7. Stamp Duty Law, Law No. 13 of 1985
From the regulations and legal basis above, it is known that there are various types of
taxes. For example the UN, PPNB, Stamp Tax, and Income Tax. Each has a strong legal basis
that is compelling for all citizens or affected by taxpayers.

2. Tax function
The tax function according to Diana Sari (2013: 37) there are 2 (two), namely:
1. Reception Function (Budgetair)
Namely as a tool (source) to enter as much money as possible in the State Treasury
with the aim to finance state expenditure, namely routine expenditure and
development. As a source of state tax revenue functions to finance state expenditures.
To carry out routine tasks of the state and carry out state development requires a fee.
This fee can be obtained from tax revenue. Taxes are used for routine financing such
asemployee expenditure, goods expenditure, maintenance, and so on. For
development financing, money is released from government savings, that is, domestic
revenues less routine expenses. This government savings from year to year must be
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 increased in accordance with the increasing financing needs of development and this
is expected from the tax sector.
2. Regulatory Functions (Regular)
Namely as a tool to achieve certain objectives in the financial sector (for example in
the economic, political, cultural, defense and security) for example: make changes in
tariffs, provide exceptions, reliefs or conversely specific burdens that are indicated on
certain issues. The government can regulate economic growth through tax policies.
With the regulating function, taxes can be used as a means to an end. The
implementation of this function can be positive and negative. The implementation of a
positive tax function means that if an activity carried out by the community by the
government is seen as something positive, it is therefore encouraged by the
government to provide encouragement in the form of tax incentives carried out by
providing tax facilities. Meanwhile, the implementation of negative regulating
functions is intended to prevent or hinder developments that lead the life of the
community towards certain goals. This can be done by making regulations in the field
of taxation that inhibit and burden the community to carry out an activity that the
government wants to eradicate.
In addition to the two functions above, tax also has other functions, namely:
1. Stability Function
With the tax, the government has the funds to carry out policies related to price
stability so that inflation can be controlled. This can be done, among others, by
regulating the circulation of money in the community, tax collection, and effective
and efficient use of taxes.
2. Revenue Redistribution Function
The tax that has been collected by the state will be used to finance all public interests,
including to finance development so as to open employment opportunities, which in
turn will increase people's income.
3. Function of Democracy
The tax that has been collected by the state is a form of mutual cooperation system.
This function is associated with the level of government service to the taxpayer
community.

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 3. Tax Grouping

Tax classification according to Mardiasmo (2011: 7), namely:

1. According to the group
a. Direct tax, which is a tax that must be borne by yourself, cannot be charged or
delegated to others. Example: Income Tax.
b. Indirect taxes, i.e. taxes that can ultimately be charged or delegated to others.
Example: Value Added Tax.
2. According to its nature
a. Subjective tax, namely tax originating from or based on the subject, in the
sense of paying attention to the conditions of the Taxpayer. Example: Income
Tax.
b. Objective tax, which is a tax that originates from the object, regardless of the
state of the taxpayer. Example: Value Added Tax and Sales Tax on Luxury
Goods.
3. According to the polling institution
a. Central tax, which is a tax collected by the central government and used to
finance state households. Examples: Income Tax, Value Added Tax and Sales
Tax on Luxury Goods and Stamp Duty.
b. Regional Tax, which is a tax collected by the Regional Government and used
to finance regional households.

4. Tax System In Indonesia

There is a wide variety of taxes in Indonesia that companies, investors, and individuals
need to comply with. This includes corporate income tax, individual income tax, withholding
taxes, international tax agreements, value-added tax (VAT), luxury-goods sales tax, customs &
excise, tax concessions, and land & building tax.

Corporate Income Tax

A company is subject to the tax obligations set by the Indonesian government if the
company's domicile is in Indonesia. Similarly, a foreign company that has a (permanent)
establishment in Indonesia - and carries out business activities through this local entity - falls
under the Indonesian tax regime. If the foreign company does not have a permanent
establishment in Indonesia but does generate income through business activities in Indonesia,
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then it needs to settle its tax liabilities through withholding of the tax by the Indonesian party
paying the income.
In general, a corporate income tax rate of 25 percent applies in Indonesia. However, there are
several exemptions:
 Companies listed on the Indonesia Stock Exchange (IDX) that offer at least 40
percent of their total share capital to the public obtain a 5 percent tax cut (hence a tax
rate of 20 percent applies for these public companies).
 Small and medium-enterprises with an annual turnover below IDR 50 billion (approx.
USD $3.8 million) obtain a 50 percent tax discount (imposed proportionally on
taxable income of the part of gross turnover up to IDR 4.8 billion). In 2013,
Indonesia's Finance Ministry issued a regulation that set a one percent income tax
tariff on individual and institutional taxpayers with an annual gross turnover below
IDR 4.8 billion (approx. USD $363,636).
Corporate Income Tax Tax Rate
• normal rate 25%
• Public company with >40% of its shares traded on the IDX 20%
• Companies with a gross turnover below IDR 50 billion 12.5%
• Companies with a gross turnover below IDR 4.8 billion 1%
Individual Income Tax
If an individual fulfills any of the following conditions, then he/she is regarded a tax resident
in Indonesia (except if a tax treaty overrides these rules):
 the individual lives in Indonesia;
 the individual is in Indonesia for more than 183 days within a 12-month period;
 the individual is in Indonesia during a fiscal year and intends to reside in Indonesia.
Meanwhile, non-resident individuals are subject to a 20 percent withholding tax on
Indonesia-sourced income.
Nearly all income earned by individual taxpayers in Indonesia is subject to income tax. The
following progressive rates are charged to taxable annual income:

Individual Income Tax Tax Rate

• Up to IDR 50 million 5%
• Over IDR 50 million to IDR 250 million 15%

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 • Over IDR 250 million to IDR 500 million 25%
• Over IDR 500 million 30%
A large part of individual income tax is collected through withholding by employers.
Employers withhold income tax on a monthly basis from the salaries and other compensation
paid to the employees. In case the employee is a resident taxpayer (living in Indonesia), the
above-mentioned tax rates apply. If the individual is a non-resident taxpayer, the withholding
tax is 20 percent of the gross amount (in case of a tax treaty the amount may vary).
Withholding Tax (for payments to residents) Tax Rate
• For interest, dividends & royalties 15%
• For services 2%
• for land and building rental (final tax) 10%
• These withholding taxes are considered corporate tax prepayments
• Withholding tax calculated on sales/revenue is considered a final tax

Withholding Tax (for payments to non-residents) Tax Rate

• normal rate (can be reduced by using tax treaty provisions, or exempt
20%
services that qualify as business profits)
Annual non-taxable income was originally set at IDR 36 million (approx. USD $2,727) in
2016. However, in April 2016 Finance Minister Bambang Brodjonegoro said the government
plans to raise non-taxable income by 50 percent to IDR 54 million (approx. USD $4,090) in a
bid to strengthen people's purchasing power and encourage household consumption.
Value-Added Tax (VAT)
Value Added Tax (VAT) involves the transfer of taxable goods or the provision of taxable
services in Indonesia. Events/services that are taxable:
 Deliveries of taxable goods in by an enterprise;
 Import of taxable goods;
 Deliveries of taxable services by an enterprise;
 Use or consumption of taxable intangible goods/services originating from abroad;
 Export of taxable goods (tangible and intangible) or services by a taxable enterprise.
Value-Added Tax (VAT) Tax Rate
• normal rate 10%
Generally, the VAT rate is 10 percent in Indonesia. However, the exact rate may be increased
or decreased to 15 percent or 5 percent according to government regulation. VAT on the
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export of taxable tangible and intangible goods as well as export of services is fixed at 0
percent. Certain limitations for the zero-rated VAT apply to exports of services.
Luxury-Goods Sales Tax
In addition to VAT, Indonesia has a so-called luxury-goods sales tax (LGST), a tax that was
introduced in the Suharto era and meant to create a more just society. This tax implies that the
deliveries or imports of certain manufactured taxable goods - for example luxury cars,
apartments and houses - are subject to an extra tax. Currently, LGST rates are set between 10
- 125 percent (the law allows for a maximum LGST rate of 200 percent).
Customs & Excise
Although Indonesian law allows import duties to range between 0 and 150 percent (of
the customs value of the imported good, the highest rate currently set is at 40 percent. Due to
the globalizing economy, Indonesia has signed a number of free-trade agreements, effectively
scrapping or significantly lowering import duty rates. However, for protectionist strategies
the government still applies high rates for specific goods. There are also anti-dumping import
duty rates applicable on certain products from certain countries.

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 CHAPTER III
CONCLUSION

Conclusion

One of the taxation laws in Indonesia is as stipulated in Law Number 16 of 2009.In

addition to Law Number 16 of 2009, there are other legal bases which form the basis
fortaxation.
The tax function according to Diana Sari (2013: 37) there are 2 (two), namely:
Reception Function (Budgetair), Regulatory Functions (Regular).
In addition to the two functions above, tax also has other functions, namely:
Stability Function, Revenue Redistribution Function, Function of Democracy.
Tax classification according to Mardiasmo (2011: 7), namely:
According to the group, According to its nature, According to the polling institution.
There is a wide variety of taxes in Indonesia that companies, investors, and individuals
need to comply with. This includes corporate income tax, individual income tax, withholding
taxes, international tax agreements, value-added tax (VAT), luxury-goods sales tax, customs &
excise, tax concessions, and land & building tax.

Suggest

We are as the writer want to apology for the shortage of this paper. We know that this
paper is still far from perfect. So that we need the suggest from the reader for the perfection of
this paper. Thank you very much for the reader.

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 BIBLIOGRAPHY

https://www.indonesia-investments.com/id/keuangan/sistem-pajak/item277? Diakses tanggal

31 Agustus 2019.
https://www.cekindo.com/blog/income-taxation-system-in-indonesia Diakses tanggal 31
Agustus 2019
https://en.wikipedia.org/wiki/Taxation_in_Indonesia Diakses tanggal 31 Agustus 2019