Democrats Tax Plan: between Taxes and Democracy

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Taxes and democracy are actually two things that are sustainable and affect each other. In a democratic system, taxes are known as an agreement between the state and society as taxpayers.

Then, through that democratic process, the right tax policy can be legitimized. Today, democracy is considered the right system to guarantee people’s contribution in paying taxes. And it can be understood that taxes and democracy are a whole.

The Relationship between Taxes and Democracy That Not Many People Know

Through democracy, tax compliance, which has been a necessity of every country, can be realized. Democracy also encourages stakeholders in a country to coordinate with each other to achieve unbiased policies.

The literature on democracy in general has actually been found a lot. However, literature that attributes the role of democracy in legitimizing the law and expounding it comprehensively is still very rare.

Agustin Jose Menendez is one of the academics who discusse the material through his book entitle Justifying Taxes: Some Elements for a General Theory of Democratic Tax Law. The book was publishe in 2010 and consists of 9 chapters.

This 367-page book offers 4 things. First, the democratic foundation that forms the foundation of the tax law framework. Second, the contribution of knowledge of the sociology of law and democracy to the legitimacy of tax law. Third, the history of tax collection. Fourth, justification and legitimacy of tax collection

In the initial part, the author elaborates first on the theory of democracy in relation to tax law. According to him, tax norms arise from a democratic process by the people that legitimizes taxation policies. In general theory, democracy in tax law should be base on 3 things.

First, ethical constructivism. The principle of justice is not describe as the result of a desire. Justice is represente as the result of a constructive procedure base on practical or communicative reasons. However, empirical verification is not the only criterion in determining the truth.

Second, deliberative democracy. A democratic model whose legal legitimacy is derive from the discourse that occurs in the dynamics of civil society so that people’s participation in the formation of aspirations can be value equally. Common norms of action must be declare valid and truste by each individual. In this theory, the deliberative decision of the most ideal needs that society agrees upon.

Third, post-positivism. According to this theory, a complete or thorough legal concept should include theory and practice. That is, the law will not work if the relationship between theory and reality does not run continuously. Furthermore, it can also be interprete that there is a link between ethics and deliberative democracy and the conceptualization of law.

According to the author, the tax can be understood as the transition of resources from individuals to public institutions. The transfer of these resources is then use by public institutions to provide services to the community.

As for in its collection, the tax is impose forcefully. This element of coercion can be describe from the formation of regulations that oblige people to pay taxes. This coercive nature can be one of the keys to encourage taxpayer compliance in carrying out their tax obligations.

The regulation itself is the result of discussions between the government and the community through a deliberative forum. In this context, the taxpayer is represente by a certain party as a representative of the people to influence the process of forming a tax policy that is considere to be able to create welfare and not harm society.

Therefore, in this book, Menendez emphasizes the importance of maintaining the principle because there should be no taxation without representation. In addition, the author also comprehensively explains the justification of tax collection and the obligation to pay taxes in 3 chapters and the history of tax collection.

Tax democratic functions

The democratic function of taxes is a function that is one of the incarnations or forms of a mutual aid system in government and development activities for the benefit of human beings.

The function of democracy today is often associate with a person’s right to obtain services from the government. If a person has committe the obligation to pay taxes to the State in accordance with the applicable provisions, then he has the right to get good service from the government.

If the government does not provide good services, taxpayers can make complaints against the government. The redistribution function is a function that emphasizes more on the elements of equality and justice in society.

This can be seen for example with the existence of progressive rates on tax laws that impose greater taxes on people who have large incomes and smaller taxes on people who have less income.

Just as democracies mention that government is from, by and for the people, so is the tax. It could be argue that taxes come from, by and for the people themselves.

The purpose of this is that the income or budget of a country’s funds comes from the people which is carrie out through the collection of taxes or comes from the natural wealth containe in the country which must be paid by the people or it can also be referre to as the transfer of wealth from the people to the state treasury which is use to finance the interests of the government and the welfare of the general people.

In Indonesia, taxes are an obligation that must be paid by every citizen who has met the subjective and objective requirements to pay taxes. The obligation to pay taxes on their own is containe in article 23 A of the 1945 Constitution which reads “Taxes and other levies of a coercive nature for state purposes are regulate by law”.

In addition, in Indonesia, taxes have the most important position, in addition to financing the interests and welfare of the community, taxes are the largest support for the state budget in Indonesia.

In the posture of the 2018 State Budget, state revenue is projecte to be 1,894.7 trillion rupiah with details of revenues from taxes of 1,618.1 trillion rupiah, Non-Tax State Revenues (PNBP) of 275.4 trillion rupiah, and grants of 1.2 trillion rupiah.

The amount of state revenue targets from the tax sector, makes everything in Indonesia use as a tax object, such as vehicle tax, income tax, land and building tax, value adde tax, tax when shopping and the latest is that the government is starting to target social media users such as YouTubers and celebrities as tax objects.

This is in accordance with the Minister of Finance Regulation 210 / PMK 010/2018 concerning Tax Treatment of Trade Transactions through Electronic Systems. Like a slogan that says that “Wise citizens obey to pay taxes”.

This is a slogan that is often heard among the general public, where this slogan has always been massively campaigne by the government both through print and electronic media.

The goal is that people can obediently pay taxes, because taxes are one of the sources of state financial revenues apart from Non-Tax State Revenues (PNBP) and grants both at home and abroad that are use to finance development.

The government’s efforts to encourage people to pay taxes by emphasizing that without taxes, development will not run, and if development does not run, the government certainly cannot prosper the people, it is not directly proportional to the facts.

So by not paying taxes, development in Indonesia will not run well. Moreover, in Indonesia, the development is still very minimal compare to other countries. However, currently, many people who have not obeye to pay taxes are cause by the lack of public information about the benefits of the tax itself.

The benefits of taxes for the state are: Financing state expenditures, such as: self-liquiditing expenditures. For example: expenditures on productive projects of export goods.

Finance reproductive expenditures, such as: expenses that provide economic benefits to society. For example: expenditures on irrigation and agriculture. Finance expenses that are not self-liquiditing and not reproductive.

For example: expenses for the erection of monuments and recreational objects. Finance unproductive expenses. For example: expenditures to finance the country’s defense or war and expenditures on future savings, namely expenditures on orphans.

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So by obediently paying taxes, the benefits that people can receive are: Public facilities and infrastructure, such as: roads, bridges, schools and hospitals, Defense and security, such as: buildings, weapons, housing to employee salaries, Food and fuel oil subsidies, Environmental and cultural sustainability, Election funds, Development of mass transportation tools and others.

From now on as an Indonesian citizen to be obedient to pay taxes, because the benefits will be very useful for all people. In addition, it is also so that it can make Indonesia more advance than it is now by paying obligations, namely paying taxes.

Because the characteristic of develope countries is if people’s consciousness pays high taxes. So it can be conclude that the tax comes from the people, by the people. And for the benefit of the people themselves and also the government.

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