Indonesian VAT reform should level the playing field for women

Author: Citra Handayani Nasruddin, Republic of Indonesia The Indonesian government and the House of Representatives have been discussing a multi-tariff value-added tax (VAT) scheme as part of a proposed overhaul of tax legislation. Because the plan includes increasing the VAT rate for some goods and services, it will be challenging for policymakers to balance the […] The post Indonesian VAT reform should level the playing field for women first appeared on East Asia Forum.

Indonesian VAT reform should level the playing field for women

Author: Citra Handayani Nasruddin, Republic of Indonesia

The Indonesian government and the House of Representatives have been discussing a multi-tariff value-added tax (VAT) scheme as part of a proposed overhaul of tax legislation. Because the plan includes increasing the VAT rate for some goods and services, it will be challenging for policymakers to balance the inherent trade-offs of the tax. In a context of entrenched gender inequality, the government also has the opportunity to integrate a gender lens into the scheme, reshaping the path toward inclusive recovery from the COVID-19 pandemic.

Research has consistently shown that because women have different consumption patterns due to gendered social roles, they are often disadvantaged by the structure of VATs compared to men. But gender mainstreaming in tax design and implementation can mitigate this risk and offer an equaliser for inequality.

In theory, there are multiple advantages of a multi-tariff VAT. The number of goods and services to which Indonesia’s current 10 per cent VAT rate is applied, and its VAT-to-GDP ratio of around 3.6 per cent, are relatively low compared to other countries, suggesting untapped potential. By taxing more forms of consumption the government could broaden the tax base, close loopholes and increase tax revenues. In other words, the new scheme has the potential to increase economic efficiency and state revenues.

On the other hand, VATs unavoidably raise equity issues. Like other indirect taxes, VATs usually have regressive effects: because they are applied equally to everyone regardless of income, those in the lower-income bracket will spend a greater proportion of their wage on consumption.

Gender appears to compound these regressive effects. Because women tend to spend more of their earnings on basic needs and family essentials, they too stand to be disproportionately impacted if VAT exemptions are not appropriately applied. Studies from countries as far apart as Nicaragua and South Africa have revealed that female-headed households — especially those with children and in lower income brackets — are the most vulnerable to the distributional effects of VAT.

Moreover, entrenched social norms have confined women to domestic and reproductive roles, assigning them as primary caregivers and homemakers. Data from the OECD confirms that worldwide, women perform up to ten times more unpaid care work than men. The double burden of work and unequal distribution of domestic work leads to lower incomes for women, constraining their economic agency. Indonesia’s Central Bureau of Statistics revealed in February 2020 that women earn 23 per cent less than men. For that reason alone, increases in indirect taxation, as opposed to more progressive direct taxes, will disproportionately impact women.

To mitigate the disproportionate effects of tax reform on the poor, the Indonesian government has stated in its 2022 Macroeconomic Framework and Fiscal Policy Principles that the new VAT scheme will be made fairer and less regressive by putting lower tariffs on basic needs and recycling new revenues into social programs and transfers to the poor. But given the lack of gender mainstreaming in taxation policy, gender-specific needs are at risk of being overlooked in tax analysis and policy formulation.

Applying a gender lens in tax policy has become all the more critical because of the widening gender inequality during the COVID-19 pandemic. The increasing gap in economic participation and opportunities between men and women has seen Indonesia’s rank in The WEF Global Gender Gap fall from 85th in 2020 to 101st in 2021. The percentage of Indonesian women in senior positions has also plummeted from 54.9 per cent in 2020 to 29.8 per cent in 2021. Astudy by the UN Development Programme in 2020 showed that more than 37 per cent of women-owned businesses in Indonesia experienced reductions in income of up to 60 per cent.

New revenue from VAT reform must be used urgently to fund social security and welfare programs that alleviate the impact of the pandemic on women and vulnerable groups. The government’s inability to collect adequate revenues could undermine the sustainability of social and public services provision post-pandemic. In turn, it could heighten the burden shouldered by poor women, perpetuating a vicious cycle of inequality.

Incorporating gender equality objectives into the new VAT policy design will support balancing the equity–efficiency trade-off inherent in taxation policy. The government could apply VAT exemptions and zero-rating consumption goods or lower the tariff on essential goods and services disproportionately consumed by women. Some examples are family essentials such as food, clothes, education, healthcare for children, women’s hygiene products and reproductive healthcare like menstrual products. The benefits will not only support women but also spill over to the welfare of other household members. Accordingly, it will provide a level of playing field for women and men, and a just recovery for all.

Citra Handayani Nasruddin is Senior Analyst in the Fiscal Policy Agency, Ministry of Finance, Republic of Indonesia. The views and opinions expressed in this article are solely those of the author, and do not necessarily reflect the affiliated institutions.

The post Indonesian VAT reform should level the playing field for women first appeared on East Asia Forum.
Source : East Asia Forum More   

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Cambodia PM Hun Sen Walks Back Death Threat on Exiled Scholar

Political analysts urge wariness about promises from Hun Sen.

Cambodia PM Hun Sen Walks Back Death Threat on Exiled Scholar

An academic living in Thailand who was told last week by Cambodian Prime Minister Hun Sen “you will be shot” over a political analysis he posted on Facebook received a reprieve on Monday, when the strongman called the work “reasonable and acceptable” and cancelled an arrest warrant for the scholar.

In a Facebook post Monday, Hun Sen said a Cambodia Daily interview with Bangkok-based professor Seng Sary had clarified that a July Facebook post about forming a national reconciliation government was hypothetical, and not a call to form a rival power center.

“I appeal to the court to consider cancelling the arrest warrant for Dr. Seng Sary.  In the meantime, I encourage Dr. Seng Sary to continue to perform social issues analysis for the study and research benefits of the social science. I also appeal to Dr. Seng Sary’s wife, children and parents to stop worrying about this,” Hun Sen said.        

On Friday Hun Sen had ordered Seng Sary arrested for writing the Facebook comment in which he described forces that could lead to change in the political landscape in Cambodia, which has been ruled by Hun Sen since 1985.

The alignment of the six forces—opposition party supporters, voters and victims of social injustice, youth, internal issues in the ruling party, the support of the armed forces, and the support of the international community—could bring about a national reconciliation government, Seng Sary wrote.

“There is an arrest warrant for Dr. Seng Sary because you support six conditions to establish a shadow government overseas,” an angry Hun Sen said Friday, likening the idea to the National Unity Government that has risen in Myanmar to counter the military regime that took power in a February coup. 

“The court has already issued the warrant. I am telling you if you are involved with an armed force, or overseas government, you must be arrested,” he said and urged Seng Sary to remove the post.

“We need to ask him about the six points to establish an overseas government. You have encouraged people to form it. You will be jailed. Not only will you be jailed for this so-called rebel movement, you will be shot. If they see you, you will be shot,” Hun Sen said.

Seng Sary. who had clarified that he does not support forming a government in exile but merely laid out hypothetical conditions for one, told RFA’s Khmer Service Monday it was a good sign that Hun Sen is listening to the opinions of analysts and intellectuals, but he did not feel completely safe yet.

“I have not seen the court drop my case yet, so it is difficult for me to decide whether I should return to Cambodia, because it has to do with my safety,” Seng Sary said.

“I hope I can get my charges dropped soon,” he said.

Seng Sary said he was fortunate to be in Thailand when Hun Sen ordered his arrest. Otherwise, he would never have been able to escape or explain to Hun Sen the meaning of his analysis.

“I hope that in the future, the head of government will more carefully consider posts on social media… Let the government have a high understanding of contradictory views or political views that people want express.”

Political analyst Kim Sok, who lives in exile in Finland, said that Seng Sary is right to remain in Thailand and act with caution about anything Hun Sen says.

“He did request that the court revoke Seng Sary’s arrest warrant, but who knows? When Seng Sary returns to Cambodia and if he is arrested, Hun Sen could say he only made the request to cancel the arrest order, but it is up to the court because the court is independent. So be careful with this game,” Kim Sok said.

RFA was unable to reach Justice Ministry spokesman Chin Malin for comment on Hun Sen's stance. The spokesman for the Phnom Penh Municipal Court, Plang Sophal was also not available.

Chak Sopheap, the Executive Director of the Cambodian Center for Human Rights, welcomed the suspension of the arrest warrant and urged the government to be more open to intellectuals and political analysts.

“There must be a guarantee of full freedom of expression, and there should be no indictment or arrest just because citizens are expressing their opinions,” she said.

Some Facebook users wrote in support of Hun Sen’s change of heart, while others pointed out that the Cambodian leader has broken promises to activists in exile, saying they could return to the country without fear of arrest, but arresting them anyway.

The exchange with Seng Sary came a little than a week after Hun Sen Hun Sen crashed a Zoom strategy session of the opposition Cambodia National Rescue Party, which Hun Sen had banned in 2017.

 “I wanted to send a clear message to the rebels that there are people of Hun Sen everywhere,” the prime minister said of his intervention in the Zoom call.

Reported by RFA’s Khmer Service. Translated by Sok Ry Sum. Written in English by Eugene Whong.

Source : Radio Free Asia More   

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