The Role of Taxation in Economic Growth and Develoopment

600 Words2 Pages
It is very common acknowledged that taxation plays an important role in economic growth development. In particular, taxes provide greater economic substance in order to build basic structure and the quality of life in developing countries. Indonesia is nevertheless also in the position that really depends on the collection of tax revenue as it generates almost approximately 70-80% of national income. Directorate General of Taxes (DGT), the main government body whose mission is to collect national tax revenue will always put a lot of effort to realize its annual tax target. In 2014, DGT has a target of 1.110 trillion rupiahs, 66% of the total national income of 1.600 trillion rupiahs – a slightly lower percentage compared to preceding periods. In order to reach the target, DGT has provided strategic plans to help meet the target. However, during the implementation of the plans, DGT has to deal with a few strategic challenges such as Transfer Pricing, tax avoidance and tax evasion where they will be such an obstacle of collecting tax revenue. Among these strategic challenges, Transfer Pricing has been the most primary issue within DGT for the past few years. DGT started establishing Transfer Pricing division in 2007 which administers, analyzes and guides all tax officers whose task are dealing with Transfer Pricing cases. Meanwhile, data from Ministry of Finance indicates that there has been considerable 4000 MNEs have not fulfilled its tax obligation to pay tax

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