Demographic Burden: Burden or Bless?

Oleh: Andi Zulfikar, Pegawai Direktorat Jenderal Pajak

The Central Bureau of Statistics (BPS) estimates that Indonesia will face the era of demographic bonus for the years 2020 to 2035. It means that the number of the productive people will be higher than the number of unproductive people in that time. The ratio of the productive people will be 64 percent of total Indonesian population and this will be the highest in the history. Currently, Indonesia is the world’s fourth most populous nation after China, India, and the United States. Total of population is around 261 million. It means that there will be more than 166 million productive people of Indonesia on that time.

It becomes a challenge for Indonesia’s government to manage it. As we know, Indonesia has a plan to create Indonesian Gold in 2045. Great effort is needed to realize it. Especially because Indonesia is a unique country which is known as the largest archipelago in the world. There are five major islands from the number of 17,508 islands in this country. From that five major islands, the largest cluster is on Java. About 60 percent of the Indonesian’s population are on that island. For the comparison, Sumatra, which is much larger than Java, has less than a third of Java’s population. It means that there will be the highest productive people on Java in the era of demographic bonus.

Focusing of the number of the people on Java, Indonesia’s government had built many infrastructure on that island since the era of President Suharto. Of course, it was relevant, because the quantity of the people needed more infrastructure. But right now, the economic challenge becomes different. Since the quality of infrastructure on Java Island is the best in this country, government right now commits to develop infrastructure outside Java Island. Since 2014, massive infrastructure developments have been done. The government knows to face demographic bonus, infrastructure is the one of the most important thing.

Another aspects that must be prepared are education and health aspects. Twenty percent target of total government expenditure is allocated for education aspect. To improve education, the government has built many schools, given many scholarships, and improve the quality of the teachers and lectures. Productive people need good skills. On the other hand, 5 % of central government budget and 10 % of regional budget are allocated for health budget. As the result, government plans to have not only skilled but also healthy productive people to make sure that demographic burden will be a God’s bless for Indonesia.

Tax Policy

As we know, most of our country income comes from taxes. To build infrastructure, to have more skilled and healthy people, government needs more money. Because of that, taxes must be taught as one of the important thing for Indonesian future. It is about 70 % of country income that is contributed by taxpayers. It means that tax has strategic role for Indonesia’s economic. Without that source of income, it will be difficult for Indonesia to maintain economic problem.

Facing demographic bonus, tax is not only used as the source of income but also used as the economic policy. For example, to make sure that Micro, Small, Medium Enterprises (MSME) can not only improve but also compete in the global era, our government cut the tax down to 0,5 %. It gives MSME more changes to maintain their cash flow. There is a hope that productive people can rethink to be an entrepreneur so that demographic bonus can give a best impact for us. Creating more entrepreneurs will be the way to push economic growth.  

Right now, our government has been doing tax reform. Of course, there will be many economy problem that is connected with that reform. Actually, it’s not only a way to fix the problem of Directorate General of Taxes (DGT), but also a way to fix the problem of our country especially the problem of facing demographic bonus.

Indonesia tax ratio in 2018 was 11.5 %. Ideally, according of World Bank, Indonesia tax ratio must be 15 %. With that ratio, Indonesia can have more income source to build better nation. With finishing tax reform, we hope that tax ratio can be reach at least in the year of 2024.

As the conclusion, God has given us an opportunity to have a developed country by facing demographic bonus. It is a sign from God, and we must prepare it well. One way to prepare it well is by using all of our efforts, and one of the best efforts is by tax reform.

Demographic bonus is waiting for us, are we ready to maximize that opportunity?

*) Tulisan ini merupakan pendapat pribadi penulis dan bukan cerminan sikap instansi penulis bekerja.