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Based on data provided by OEDC (2022), Indonesia's tax-to-GDP ratio was 10.1% in 2020, below the Asia and Pacific average of 19.1% by 9.0 percentage points. It was also below the OECD average (33.5%) by 23.4 percentage points. Data from World Bank (2022) is even lower. Tax revenue (% of GDP) in Indonesia was 8.3% in 2020.

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- Regarding sustainability issues related to financing the extension of social protection, a comprehensive approach parallel with tax reform to elevate fiscal equity and generate higher revenues.
- In comparison with those countries, we can see that Indonesia has the lowest personal income tax. According to ILO, a country needs around 15-20% tax-to-GDP ratio for adequate social protection. Meanwhile, Indonesia's tax-to-GDP ratio was only 10.1% in 2020.
- So, that's why tax expansion is essential to generate more fiscal revenue to cover social security for digital gig workers.
- The collected income tax from digital gig workers will be used to cover their social security premium.

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UU No. 40 Tahun 2004 tentang Sistem Jaminan Sosial Nasional

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UU No. 40 Tahun 2004 tentang Sistem Jaminan Sosial Nasional

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National Social Security System

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Lack of social security coverage for digital gig workers

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Lack of social security coverage for digital gig workers

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1. High risks of poverty, as they are primarily unprotected and combined with poor working conditions. A large informal-formal wage gap among employees helps explain the higher incidence of poverty among informal employees.

2. Face high occupational risks. Most informal occupations have low occupational safety and health (OSH). Unsafe and unhealthy working conditions will lead to greater occupational injuries and illnesses, ultimately leading to a high cost of health expenditure.

3. The absence of adequate social protection arrangements makes informal economy workers and their families particularly vulnerable. For example, a lack of effective financial health risk protection often results in a significant health expense burden that can lead to substantial financial difficulties.

4. Mostly, informal employment absorbs less-educated workers. Lower levels of education reduce competitiveness to enter formal jobs, which mostly provide protection and higher wages.

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Inequality of location (rural and urban) makes it hard to find the right calculation

Hard to calculate because the flexibility hours

There is a possibility that the employer is uncooperative and refuses

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Prove their loyalty/activeness

Secure the finances of the worker

Improve their welfare (financially, wellness)

Facilitate the calculation of income tax

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basic pay

annual bonuses

tips

in-kind benefits

productivity and performance pay

allowances and premiums for non-standard work hours or dangerous work.

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Minimum wage regulations for digital gig workers

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Minimum wage regulations for digital gig workers

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Large scope (macro)

Elevate fiscal equity and generate higher revenues

Comprehensive

Reallocate Tax Revenue for gig worker's social security

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Hard to do (complicated relations of stakeholders)

Can not be done in a short time (middle - 5 years to long term plan - more than 5 years to complete)

Resistance from worker's associations

Depend on company's cooperation

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Conclusion and suggestion for policy maker

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Conclusion and suggestion for policy maker

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Slide 1:
Extending social protection with tax expansion is a formidable policy challenge.
In order to do that, first...
- First, we must expand the fiscal scope needed to scale up social protection
-Second, extending obligatory coverage to previously excluded informal and NSE workers (digital workers), redesigning contributions and administrative procedures to reflect the needs of informal and NSE workers (digital workers), and subsidising contributions for those with very low incomes.

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Regulation: PP 36 2021 tentang Pengupahan
- comparing the working hours with the income they have
- Calculate the average monthly income compare to other non-standard jobs
- Limit their hours for their well-being

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Regulation: Tax company regulation (UU Harmonisasi Peraturan Perpajakan No 7 Tahun 2021)
- Which job that has not been taxed yet (tax or no tax)
- Review company tax report
- Review company profit in one year
(Percentage e.g., 5%, 10%, etc.)

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simplification of the tax system

introducing comprehensive tax administration reforms

managing governance and human resources

smart use of information management systems, modern registration (e-filing)

audit and verification program.