A decade’s worth of global research by the International Monetary Fund (IMF) indicates that government policy is an essential part of reducing inequality within society.
“It would be a mistake to surrender inequality reduction to economic growth. Government intervention and policy is still important in handling inequality reduction and growth,” International NGO Forum on Indonesian Development (INFID) director Sugeng Bahagijo said, citing IMF data.
What are the programs and approaches that can effectively and efficiently reduce inequality? At the recent Forum Merdeka Barat 9 ( FMB9 ) media forum, held in Central Jakarta on Sept. 9, Sugeng outlined some of the policies the government could pursue toward this end.
“Our tax ratio is not in line with our profile as a middle-income country,” Sugeng said. “We have to reduce the amount of funds flowing abroad via tax evasion and avoidance.”
Similarly, the nation’s tax classification system is outdated. The highest income category of Rp 500 million in the tax laws is too low.
“It might have applied at the end of the 1970s and early 1980s, but I think many of our executives now make more than that monthly,” Sugeng said.