Is it Time for a Rich Man’s Tax?

epajak.or.id The Rich Population is Increasing, Is it Time for a Rich Man’s Tax?

Indonesia faces a paradox in its economic landscape. On the one hand, poverty and inequality are still a problem, but on the other hand, the number of high-wealth individuals continues to increase. Data from The Global Wealth Report published by INDEF in Indonesia Economic Outlook 2025 reveals that Indonesia’s wealthy population is growing rapidly. This shows a great potential to boost state revenue through tax reforms targeting the upper-middle economic group.

The Surge of Wealth in Indonesia

According to The Global Wealth Report, the number of high net worth individuals or the so-called ‘crazy rich’ in Indonesia has increased significantly in recent years. This growth reflects economic improvement, especially for the upper class, but also highlights the widening disparities in society.

Quoting the INDEF report, based on the data from the Global Wealth Report above, Indonesia has a population of rich people with wealth of around US$1 million – US$50 of around 191 thousand people in 2021. In fact, it is predicted that in 2026 the number of rich people in Indonesia will even reach around 377 thousand people. This population even exceeds rich countries such as the United Arab Emirates (UAE). Data shows that most of this wealth is concentrated in the financial, property and investment sectors, with asset values continuing to rise. Meanwhile, the middle class, which is often cited as the main pillar of domestic consumption, is experiencing purchasing power pressures due to inflation and fiscal policies such as the increase in Value Added Tax (VAT) rates.

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Opportunities from Taxing the Rich

With the high growth of the wealthy population, many parties encourage the government to implement a more progressive taxation policy. Some measures that can be considered include:

Wealth Tax, which is applied to an individual’s total net assets, including property, stocks, and other investments. Countries like France and Norway have implemented it to reduce inequality.
Inheritance Tax, A tax on assets passed down to the next generation can be an effective instrument to levy larger contributions from those with abundant wealth.
Increased Income Tax Rate for the Highest Group, The income tax rate for individuals with the highest income can be increased to increase state revenue.

Challenges in Taxing the Rich

The implementation of tax policy targeting the rich is not without obstacles. Some of the challenges that the government must overcome include:

Tax Avoidance: Wealthy individuals tend to have access to financial advisors and asset structuring that allow them to minimise their tax burden.
Public Trust in Tax Transparency: Many doubt whether tax funds will actually be utilised efficiently and transparently.
Global Competition: In an era of globalisation, imposing high taxes on the rich may trigger wealth migration to low-tax jurisdictions.

Urgency of Tax Reform

In recent years, the government has taken steps to broaden the tax base, such as the Tax Amnesty programme in 2016 and 2021. However, the increase in contributions from wealthy individuals is still far from optimal. Deep tax reform is an urgent need, especially with the projected fiscal challenges in 2025 getting tougher.

Read also: Ministry of Finance Admits VAT Exemption Benefits the Rich More?

Potential Impact of Taxing the Rich

If successfully implemented, the progressive taxation policy targeting the rich can have a positive impact on the economy, such as:

Increase State Revenue: Additional funds from wealth tax can be allocated for infrastructure, education, and health.
Reducing Inequality: This policy can help create a more equitable redistribution of wealth.
Increasing Public Trust: Provided that the tax funds are used transparently for the benefit of the public at large.

The increasing number of crazy rich in Indonesia is an opportunity that should not be ignored. The implementation of a tax on the rich can be a strategic move to increase state revenue and reduce economic inequality. However, the success of this policy requires careful design, fair implementation, and transparency in the management of tax proceeds. It is time for Indonesia to consider this bold move to ensure inclusive and sustainable growth.