VAT on Education Services and IDR 550 Trillion of Education Budget

In recent days the public has been shocked by the discourse on the expansion of the Value Added Tax (PPN) object which is included in one of the revision points of the Law on General Provisions and Tax Procedures (KUP). I do not know who started to disseminate it, what is clear is that this discourse has become a very fierce debate among the public. Starting from ordinary people, academics, economists, to public officials have voiced about this.

Educational services are one of the service groups that will be removed from the service group which so far are not subject to VAT. The fact that this policy is still a plan and still requires approval from the House of Representatives (DPR) before it is actually implemented does not dampen the negative view of this policy.

Many opinions deplore this policy. The policy taken in the midst of the difficulties of the community affected by the COVID-19 virus is considered to be detrimental to the community. Not a few have predicted the negative impact of the presence of this policy. Schools ranging from elementary, middle, and even tertiary levels are predicted to increase administrative fees for students and students who want to study at these schools and colleges. Again, people who return feel the impact with the increasing cost of education.

VAT for Education Services

Educational services are included in 17 groups of services that are not subject to VAT in accordance with Article 4A paragraph (3) of the VAT Law. This provision is further clarified by Decree of the Minister of Finance Number KMK-223/PMK.011/2014 concerning Criteria for Educational Services Not Subject to VAT.

This provision explains that the group of educational services that are not subject to VAT can be said to cover all types of education, formal and informal. These types of educational services will later be regulated in such a way as part of the expansion of the VAT object.

The perspective of tax justice in the application of VAT on educational services is also important for the public to know. The government through the Directorate General of Taxes (DGT) itself has explained that there are at least four reasons behind the expansion of VAT objects including Educational Services VAT.

First, the government wants to create a VAT collection system that is more appropriate in responding to the twisting of economic facts as there is a determination of which party (producer or consumer) actually bears the tax burden that causes product prices to change. countries cannot compete with imported products.

Secondly, the average VAT rate in Indonesia is still lower when compared to OECD (Organization for Economic Co-operation Development) countries which reached 19% and BRICS (Brazil, Russia, India, China, and South Africa) which recorded 17%.

Thirdly, the C-efficiency level of VAT (VAT that was successfully collected compared to what should have been collected) in Indonesia was 0.6 (60%). This figure is still lower than other Southeast Asian countries such as Singapore, Vietnam, and Thailand which have reached 0.8 (80%).

Finally, there are still many tax objects that are equally consumed by people with different income levels, but the tax treatment is the same. For example, private schools with an administrative fee of three million rupiahs per month are equally excluded from the imposition of VAT with private schools with an administrative fee of fifty thousand rupiahs per month.

Fiscal Expenses

One ​​of the books edited by Peter Harris and Dominic De Cogan entitled Tax Justice and Tax Law: Understanding Unfairness in Tax System describes various views, ideas, and thoughts of experts in interpreting tax justice.

This book published in 2020 generally provides three perspectives from tax justice, namely relations and tax justice between countries, distribution of fiscal burdens among taxpayers, and relations between the state and society. The following is an explanation of the last two perspectives of the three perspectives of tax justice in relation to VAT on education services.

As explained earlier, one form of injustice in the exemption from VAT for educational services is that the exception applies to all education service providers without exception. This means that high-cost international schools are treated the same as regular, low-cost schools. This is one of the considerations for expanding the VAT object related to education services.

The fact that the scope of the provision of educational services is quite wide raises the idea that it would be fairer if certain limits were imposed which would later be subject to VAT. This means that the imposition of VAT will apply to educational services of a commercial nature.

On the other hand, educational services that are social and humanitarian in nature may still be excluded from the imposition of VAT. Justice will be seen when high income groups and enjoying premium education services are subject to higher VAT rates. This means that in order to provide more benefits to the community, multi-tariff VAT can be implemented.

State-Community Relations

Amounting to Rp550 trillion or 20% of the State Revenue and Expenditure Budget (APBN) is channeled to finance the education sector in Indonesia.

Construction of boarding school dormitories and study rooms, construction and restoration of school status, Smart Indonesia program, Bidik Misi scholarships, School Operational Assistance (BOS) funds, tourism training, laboratory construction, and the provision of scholarships for the Education Fund Management Institution are some of the uses of funds in the education sector.

During this pandemic period, the use of education funds was also given to subsidize internet quotas for students. This shows the state’s concern for the development of the world of education in Indonesia.

Seeing this fact, it is impossible for the state to allow people to have limitations in their education with the expansion of the VAT object. Some incentives in the education sector are even provided by the government. During this pandemic, more and more tax incentives are also being provided, for example a 50% reduction in Article 25 PPh installments.

To finance 20% of this state budget expenditure, of course, the state requires a large amount of funds. Taxes are one of the main sources of revenue because they support more than 80% of state revenues. Sadly, education services are actually exempt from VAT. Even though the potential for tax revenue from education services may be quite large.

The imposition of VAT on education services can greatly assist state revenues in financing the national economic recovery as a result of the pandemic and also the education sector. Of course the rules need to be regulated in such a way so as not to harm the community.

On the one hand, the state pays attention to the fairness of fiscal burdens to society and increasing the competitiveness of domestic products. On the other hand, the state must also improve the VAT collection system to optimize state revenues. This is what the government should pay attention to in discussing the expansion of the VAT object.

Finally, back again that until now this policy has not been actually implemented. The government and the DPR will certainly pay attention to the welfare of the community in determining whether or not this policy will be implemented.

As citizens we can provide the best views and ideas for this country, of course in ways that are in accordance with the ethics of politeness. Hopefully in the future, the world of education in this country can develop for the better and the state can provide welfare for all Indonesian people.

Sumber https://pajak.go.id/id/artikel/ppn-jasa-pendidikan-dan-rp550-triliun-anggaran-pendidikan

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