University of Groningen
Who pulled the strings? A comparative study of Indonesian and Vietnamese tax reform
Heij, Gitte
IMPORTANT NOTE: You are advised to consult the publisher's version (publisher's PDF) if you wish to
cite from it. Please check the document version below.
Document Version
Publisher's PDF, also known as Version of record
Publication date:
2007
Link to publication in University of Groningen/UMCG research database
Citation for published version (APA):
Heij, G. (2007). Who pulled the strings? A comparative study of Indonesian and Vietnamese tax reform s.n.
Copyright
Other than for strictly personal use, it is not permitted to download or to forward/distribute the text or part of it without the consent of the
author(s) and/or copyright holder(s), unless the work is under an open content license (like Creative Commons).
Take-down policy
If you believe that this document breaches copyright please contact us providing details, and we will remove access to the work immediately
and investigate your claim.
Downloaded from the University of Groningen/UMCG research database (Pure): http://www.rug.nl/research/portal. For technical reasons the
number of authors shown on this cover page is limited to 10 maximum.
Download date: 15-06-2017
GLOSSARY
Direct tax:
There is no generally accepted distinction between a direct and
an indirect tax. John Stuart Mill gave the following definition: “A
direct tax is one which is demanded from the very persons who
it is intended or desired should pay it. Indirect taxes are those
which are demanded from one person in the expectation and
intention that he shall indemnify himself at the expense of
another.” Direct taxes are generally taxes levied on persons.
Direct taxes are generally imposed on income, capital gains
and net worth. Gift tax, death duties and property tax are also
considered direct taxes (International Bureau of Fiscal
Documentation 1996, p.93).
Horizontal equity:
Doctrine which holds that similarly situated taxpayers should
receive similar tax treatment, for example, taxpayers who earn
the same amount of income or capital should be accorded
equal treatment (International Bureau of Fiscal Documentation
1996, p.156).
Indirect tax:
See ‘direct tax’. An indirect tax is generally imposed on
transactions, goods or events. Indirect taxes are one of the
oldest sources of government revenue. Examples include VAT
and sales tax (International Bureau of Fiscal Documentation
1996, p.166).
PAYE:
The letters PAYE were first applied to the British pay-as-youearn system whereby tax was levied on the current salaries
and wages of employees in such a way that the sum of the
deductions from current income would at the end of the tax
year be roughly equal to the tax otherwise due. The phrase
has been extended to other schemes for deducting income tax
from salaries or wages, even where the deductions must be
corrected by an end-of-the-year adjustment or must be
supplemented by an additional tax where the taxpayer’s total
income exceeds certain limits (International Bureau of Fiscal
Documentation 1996, p.224).
Progressive tax
system:
Tax system under which the average rate of (income) tax
increases as income increases (International Bureau of Fiscal
Documentation 1996, p.236).
_____________
Page 8 of 161
Regressive tax
system:
Tax system that takes a greater percentage of a lower income
than a higher income (…). The retail+ sales tax is generally a
regressive tax since it applies across the board to all sales
regardless of the purchaser’s income. The burden of the tax
falls more heavily on those who are less able to pay
(International Bureau of Fiscal Documentation 1996, p.246).
Target system:
A feature of the Indonesian tax system, the so-called ‘target
system’ has prevailed in Indonesia for centuries (Lerche 1980,
pp.34-51). When the government prepares its annual budget,
targets are set nationally for the tax revenue to be produced.
The targets are set top-down, and in the lower ranks tax
administrators have to meet these targets, which are not
always realistic in light of the economic conditions of a
particular region. Local tax collectors adopt the principle
‘taxation by negotiation’.
Tax burden:
For public finance purposes the tax burden, or tax ratio, in a
country is computed by taking the total tax payments for a
particular fiscal year as a fraction or percentage of the Gross
National Product or national income for that year (International
Bureau of Fiscal Documentation 1996, p.296). For companies
and individuals the tax burden is computed by taking the total
tax payments for a particular fiscal year as a fraction or
percentage of total gross income for that year.
Tax holidays:
A fiscal policy measure often found in developing countries. A
tax holiday offers a period of exemption from income tax for
new industries in order to develop or diversify domestic
industries. The exemption is usually given for a term of years
to ‘pioneer’ or ‘infant’ industries (International Bureau of Fiscal
Documentation 1996, p.299).
Tax threshold:
Level of income, capital, sales etc. at which tax commences to
be levied. A taxpayer with income below the threshold level is
exempt from tax. (International Bureau of Fiscal
Documentation 1996, p.305).
Vertical equity:
Doctrine which holds that differently situated taxpayers should
be treated differently, i.e. taxpayers with more income and/or
capital should pay more taxes (International Bureau of Fiscal
Documentation 1996, p.329).
Withholding tax:
Tax on income imposed at source, i.e. a third party is charged
with the task of deducting the tax from certain kinds of
payments and remitting that amount to the government.
Withholding taxes are found in practically all tax systems and
_____________
Page 9 of 161
are widely used in respect of dividends, interest, royalties and
similar payments. (….) A wage tax is usually levied as a
withholding tax. Withholding tax may be provisional or final. If
provisional, the amount withheld will be credited against the
taxpayer’s final tax liability and adjusted accordingly
(International Bureau of Fiscal Documentation 1996, p.305).
_____________
Page 10 of 161
The public finances are one of the best starting points for an
investigation of society, especially though not exclusively of its political
life. The spirit of a people, its cultural level, its social structure, the
deeds its policy may prepare — all this and more is written in its fiscal
history, stripped of all phrases. He who knows how to listen to the
message here discerns the thunder of world history more clearly than
anywhere else.
Joseph Schumpeter
1918
_____________
Page 11 of 161