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The Impact Of Taxation On Income Distribution: Evidence From Indonesia

Author

Listed:
  • KUNTA NUGRAHA

    (Centre for Labour Market Research, University of Canberra, ACT, Australia)

  • PHIL LEWIS

    (Centre for Labour Market Research, University of Canberra, ACT, Australia)

Abstract

The Indonesian economy has grown significantly since 2000, but income inequality has increased since 2001. One of the possible government tools to improve income inequality is through taxation. This paper evaluates household income, income tax, taxes on production, and their impact on income distribution. The major data sources are the National Socioeconomic Survey and the Input–Output Table. The key finding is that income tax only slightly improves income distribution, but taxes on production worsen income distribution. The other important finding is that both forms of taxation are regressive, especially for lower and middle income household. The results suggest that Indonesian taxation worsens income inequality.

Suggested Citation

  • Kunta Nugraha & Phil Lewis, 2013. "The Impact Of Taxation On Income Distribution: Evidence From Indonesia," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 58(04), pages 1-18.
    • Handle: RePEc:wsi:serxxx:v:58:y:2013:i:04:n:s0217590813500240
    DOI: 10.1142/S0217590813500240
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    Citations

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    Cited by:

    1. Nugroho, Anda & Widyastutik, & Irawan, Tony & Amaliah, Syarifah, 2021. "Does the US–China trade war increase poverty in a developing country? A dynamic general equilibrium analysis for Indonesia," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 279-290.
    2. Dogbe, Wisdom & Gil, Jose Maria, 2017. "Distributional Impacts of Green Taxes on Food Consumption in Catalonia," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 261416, European Association of Agricultural Economists.
    3. DOGBE, Wisdom & Gil, Jose M., 2017. "Environmental, Nutritional and Welfare Effects of Introducing a Carbon Tax on Food Products in Spain," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258132, Agricultural and Applied Economics Association.
    4. Vanesa Jorda & Jose M. Alonso, 2020. "What works to mitigate and reduce relative (and absolute) inequality?: A systematic review," WIDER Working Paper Series wp-2020-152, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    Keywords

    Income tax; income distribution; taxes on production; H20; H22; H23;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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