Analysis of tax treatment of personal taxpayers engaging in business with certain gross income (small enterprise)

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Small and Medium Enterprises (SMEs) have an important role in promoting the economy. In Indonesia, Small and Medium Enterprise Sector is proven able to absorb approximately 99 million workforces and on average contribute more than 50 percent of the total GDP of Indonesia every year. Due to the important role of Small and Medium Enterprises in boosting the economy, the Government's policies concerning MSMEs, both tax policies and non-tax policies, should receive special treatment. In order to simplify taxation for small enterprises, the Government of Indonesia issued Government Regulation No. 46 of 2013 dated June 12, 2013 and Regulation of the Minister of Finance of the Republic of Indonesia No. 107 /PMK.011 /2013 dated July 30, 2013 stipulating that on income from business received or accrued by a taxpayer having a certain gross turnover (not exceeding Rp 4, 800, 000, 000, -in one tax year) is subject to a final Income Tax of 1% of the gross income per month. This study aims to determine the implementation of the final tax imposition, especially for individual taxpayers doing business seen from the principles of tax collection, especially the principles of equality and simplicity. This study also seeks to find out whether the imposition of final income tax which aims to provide convenience for the taxpayer can encourage taxpayers to comply with their tax obligations. This study uses qualitative approach with data collection techniques through literature study and field study by conducting in-depth interviews with informants from all relevant stakeholders and Focus Group Discussion (FGD) with private small business actors. The result of the research shows that although the main purpose of imposition of final Income Tax is to facilitate the implementation of tax obligation for small business having gross circulation not exceeding Rp 4, 800, 000, 000, -per year, but in its implementation, especially for taxpayers, the final income tax does not meet the principles of equality because the tax treatment is different from the taxpayers of individuals who run free jobs that have the same gross turnover. The final income tax is also felt burdensome, especially for taxpayers of individuals who are just running a business and still suffer from loss or for individual taxpayers whose business turnover is still very small because the imposition of the final income tax does not recognize loss and there is no business classification based on the level of business circulation owned and non taxable income limit. As a result, numerous small entrepreneurs refuse to perform taxation obligations. In order to improve tax compliance of small entrepreneurs, the government needs to review the related tax regulations. In line with the improvement efforts in terms of taxation regulation, another important effort is to encourage small business actors to grow and develop, among others, by providing various ease of business starting from the business licenses, funding assistance, assistance to develop the quality and competitiveness of products, promotional and marketing support and so on.

Original languageEnglish
Pages (from-to)289-298
Number of pages10
JournalInternational Journal of Economic Research
Issue number9
Publication statusPublished - 2017


  • Certain business turnover
  • Equality principle
  • Final Income Tax (PPh)
  • Simplicity principle
  • Small and Medium Enterprise/SMEs)


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