Written by: Amaraduhita Laksmi P
Edited by: Fauzan Abdul, Zania R Putri, and Ghafi Reyhan
Illustration by: Lisa Kalystari
Education inequality has been a prevalent issue in Indonesia. Efforts to narrow the gap become vital to eventually improve access and quality of education to all citizens. Nevertheless, in June 2021, the Ministry of Education and Culture (also known as Kemendikbud) announced a controversial draft bill on the fifth revised document of Law Number 6 of 1983 on Provisions General and Tax Procedures in which education services offered by private educational institutions will soon be subjected to value-added tax (VAT). This regulation has raised concerns among citizens that private providers will have to increase the cost of tuition fees as a result of the VAT. While some details of this policy are still left unclear, one thing is sure: lower income students will bear the bulk of the burden.
The Special Staff of the Minister of Finance in the Field of Strategic Communication, Yustinus, said—in summary—that this policy is particularly aimed at prestigious and reputable private schools. Its purpose is mainly to assist the government in providing cross-subsidies for higher education. So far, Indonesia is only able to effectively subsidise elementary school education. There are currently 133.000 public elementary schools that can cover around 56,3% students in Indonesia, while others are allocated in a private school (Kemendikbud, 2019). However, as the level of education goes higher, especially at the university level, both the number of schools (public and private) and students attending schools decreases with it covering less than 10,6% of students throughout Indonesia. Thus, the proceeds of the VAT will be used to subsidise higher education, so that students from low socio-economic backgrounds can attend higher education (Huda, 2021).
Another contributing factor for the implementation of the VAT scheme in the education field might be the national income deficit of -5.3 percent (2nd quarter of 2020) during the COVID-19 pandemic–the worst in the past five years. By implementing VAT for education, the government hopes that government finances can recover to meet various goals, such as supporting the Acceleration of National Economic Recovery (PEN) and Exit Strategy Program, also helping Micro, Medium, and Small Enterprises (UMKM) to grow again (Ferdian, 2021). However, the government’s take on this issue seems inconsistent, especially when we consider the government’s policy of implementing a 0% Sales Tax on Luxury Goods on cars that was implemented in March 2021. This draws criticism as some think that freedom from tax should be applied to education and basic needs, not luxury goods.
Furthermore, members of the legislative body Hidayat Nur Wahid and Dede Yusuf, also commented that education should not be commercialized. According to Chapter 13 Article 31 Paragraph 1 and 2 of the Constitution of the Republic of Indonesia, “every citizen shall be entitled to acquire education; every citizen shall follow basic education and the government shall finance it.” Chapter 31 of the Constitution also specifically requires the government to allocate a minimum of 20 percent of the APBN and APBD for the education budget. The regulation has mandated the government to be responsible for financing education instead of putting a tax on it. Due to its significant importance, education in whatever form it comes from, should be a non-profit service
This issue is further exacerbated by the existence of an age indicator policy in the process of accepting new students (PPDB) into public high schools. Students from low-middle income households who have better grades but do not meet the PPDB requirements would lose their place. Consequently, the choice is to either go to a reputable private school that would cost more with the VAT or wait another year to enter a public school.
This problem also poses a dilemma considering the opportunity to get an invitation to enter university (SNMPTN), which uses the selection of grades (academic transcript) as the main requirements. This entry path has different quotas for each school, where SNMPTN will prioritize schools (private and public) with good reputation. Hence, instead of enrolling their children in any public school, parents would have to send their children to a reputable private school with even higher tuition fees due to the VAT. “It’s not about potential (taxes), but justice (fairness),” said Yustinus (CNN Indonesia, 2021). Although the rationale of this policy is to distribute income from those who can afford private school education to those who have to enrol in public schools, the education system in Indonesia is still deeply flawed which will make the regulation counter-productive with other regulations and the ones who will receive the most detrimental impact are those from low-socioeconomic background.
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