{"id":275,"date":"2025-04-05T08:00:59","date_gmt":"2025-04-05T01:00:59","guid":{"rendered":"https:\/\/pro-visioner.com\/pvk\/?p=275"},"modified":"2025-04-05T08:00:59","modified_gmt":"2025-04-05T01:00:59","slug":"ppn-and-its-origins","status":"publish","type":"post","link":"https:\/\/pro-visioner.com\/pvk\/ppn-and-its-origins\/","title":{"rendered":"PPN and its Origins"},"content":{"rendered":"\n

pro-visioner.com <\/a>– PPN and its Origins , In the midst of the excitement over the issue of VAT on groceries, how about we explore the history of the birth of VAT in Indonesia?<\/p>\n\n\n\n

The public was shocked by the news of the government’s plan to increase the VAT rate and expand the VAT tax object, from a single rate of 10 percent planned to be 12 percent proportionally. What is no less exciting is the imposition of the object of Taxable Goods (BKP), which was originally not subject to be subjected, for example on basic food (nine staples), one of which is rice.<\/p>\n\n\n\n

Likewise, in the object of Taxable Services (JKP), there are several types of services that were originally included in the negative list (not subject to VAT) to be subject to VAT such as Education Services and Health Services.<\/p>\n\n\n\n

Taxes are indeed “sexy” to be fried by the mass media and on social media.<\/p>\n\n\n\n

History of VAT<\/p>\n\n\n\n

It would be like eating sour vegetables without salt if the author only explains the history of VAT in Indonesia without first explaining how the world applies this VAT regulation.<\/p>\n\n\n\n

Quoted on the DDTC (Danny Darussalam Tax Center) website, VAT is a relatively new type of tax and is considered a modern form of taxation (Liam Ebrill, 2001). Historically, VAT is a recent fiscal innovation. In fact, Sijbern Cnossen claims that the universal introduction of VAT can be considered the most important event in the evolution of tax structures that occurred in the last half of the 20th century (Kathryn James, 2015).<\/p>\n\n\n\n

Prior to the introduction of VAT, indirect consumption taxation was limited to certain products. For example, the imposition of excise taxes on alcohol and tobacco. In addition to excise taxes, other types of indirect taxes are also known, namely sales tax and circulation tax.<\/p>\n\n\n\n

However, the distortions generated from sales tax and circulation tax due to the cascading effect of the application of these two types of taxes, coupled with the demand for increased revenue, have encouraged the government to look for alternative forms of taxation.<\/p>\n\n\n\n

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\"PPN\"
PPN<\/figcaption><\/figure>\n\n\n\n

The basic idea of VAT first emerged from a German businessman named Dr. Wilhelm von Siemens who realized the problems caused by the application of circulation tax. In the 1920s, through his writings, von Siemens then developed his idea, which he called “circulation tax improvement” or “circulation tax refinement” (Alan Schenk and Oliver Oldman, 2007).<\/p>\n\n\n\n

Besides von Siemens, the initial concept of VAT was also proposed by Thomas S. Adams in 1921 in the United States. The concept explained by Adams at that time was about how to reduce taxes on sales with taxes that had previously been paid on purchases of goods and\/or services related to business activities carried out as an effort to avoid the cascading effect. This concept is now known as the method of crediting input VAT against output tax (invoice-credit method).<\/p>\n\n\n\n

The ideas and concepts that emerged in the 1920s eventually led to the conclusion that a tax that is an “improved circulation tax” is a tax imposed and collected at each stage of production and distribution of goods and services at the time of the transaction. However, although imposed at each stage of production and distribution, with the method of crediting input tax against output tax, the tax imposed is only on the value added arising at each stage. This idea and concept is the origin of VAT.<\/p>\n\n\n\n

VAT was first implemented in France in 1948 in the form of taxation at the manufacturing stage. In 1954, France then changed the imposition of VAT from only at the manufacturing stage to taxation at all stages of production and distribution.<\/p>\n\n\n\n

Many European countries enacted VAT in the 1960s and 1970s. Meanwhile, developing countries followed suit in the 1980s and later.<\/p>\n\n\n\n

In practice, most governments apply VAT as a replacement for sales tax, which was previously applied as a form of tax on consumption. European countries, for example, have widely used VAT to reduce or eliminate the application of sales tax (Sijbren Cnossen, 1998).<\/p>\n\n\n\n

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In less than half a century, VAT has become one of the most dominant revenue instruments in various countries. VAT is also considered as a type of tax that has developed very rapidly compared to other types of taxes around the world (Kathryn James, 2015).<\/p>\n\n\n\n

As of January 1, 2016, according to OECD (2016), there are 167 countries in the world that have implemented VAT as a form of tax on consumption in their countries.<\/p>\n\n\n\n

What about in Indonesia?<\/p>\n\n\n\n

Development Tax Period I (PPb I)<\/p>\n\n\n\n

According to Slamet Soelarno, in his book Pajak Pembangunan I, published by Saung Indah in 1973, it can be said that the development of tax collection on consumption in Indonesia began with the enactment of Pajak Pembangunan I (PPb I). PPb I is one of the taxes levied by the central government based on Law Number 14 of 1947 concerning the Collection of Development Tax in Restaurants and Lodging Houses (PPb I Law of 1947).<\/p>\n\n\n\n

This tax began to be levied officially on June 1, 1947 on all payments in restaurants and lodging houses amounting to 10 percent of the payment amount. Payment here refers to the purchase of food and beverages or the rental of a room, as well as any extras such as staff, electricity, water, and so on.<\/p>\n\n\n\n

Restaurants usually frequented by people belonging to the poorer sections of the population were exempted from this payment<\/a>.<\/p>\n\n\n\n

PPb I adheres to the self-assessment system, which encourages taxpayers to calculate, collect, remit, pay, and report their own taxes based on the awareness of taxpayers. This self-assessment system is realized in the form of a contante depositing system (cash deposit system).<\/p>\n\n\n\n

With the development of Indonesia’s post-Independence situation, the PPb I Law also underwent changes in accordance with the needs of that time. This development is evidenced by the amendments and additions to the 1947 PPb I Law through Law Number 20 of 1948 concerning Making Amendments and Additions to Law Number 14 of 1947 of the Development Tax I (PPb I Law of 1948).<\/p>\n\n\n\n

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