CONTENTS*

The First Article Title: The Title Does Not Exceed Fifteen Words
Muhammad Ihsan Abdulloh . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

INDEX 11

* ©ISLAMICATE INSTITUTE Publication since 2017. All of the articles are Open Access articles, distributed under the Creative Commons
Attribution licence (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution, and reproduction in any
medium, provided the original works are properly cited.

i
 Journal of Economicate Studies 1

ARTICLE
doi: 10.32506/joes.vxix.
Received November 1, 2022; revised December 30, 2022; accepted March 11, 2023; published June 30, 2023

Fiscal Policy in Indonesian

Muhammad Ihsan Abdulloh1*
1
UIN Sunan Gunung Djati, Bandung, Indonesia
* Email: abdullohihsan@gmail.com

Abstract
This study discusses fiscal policy in Indonesia (whether it is in accordance with Islamic principles). The aim is to describe the
implementation of fiscal policy in Indonesia. This paper also discusses the implementation of fiscal policy from an Islamic
economic perspective. This research is qualitative research, using books and academic articles as the analysis method. The
results and conclusions of this study indicate that during the New Order period the Indonesian government implemented
several policies; firstly, the state budget that does not exceed the domestic revenue budget, secondly, taxation that is still
simple is immediately extended to tax objects and improvements to the method of tax assessment and collection are carried
out, thirdly, government expenditures endeavor for programs that receive priority, fourthly, government expenditures are
directed at targets for encouraging the maximum utilization of domestic resources.
Keywords: Fiscal Policy; Indonesian; Islamic
‫ملخص‬
.‫ الهدف هو وصف تنفيذ السياسة المالية في إندونيسيا‬.)‫تناقش هذه الدراسة السياسة المالية في إندونيسيا (سواء كانت متوافقة مع مبادئ الشريعة ال ٕاسلامية‬
.‫ هذا البحث هو بحث نوعي يستخدم الكتب والمقالات الأكاديمية كأسلوب تحليل‬.‫تناقش هذه الورقة أيًضا تنفيذ السياسة المالية من منظور اقتصادي إسلامي‬
‫ ميزانية الدولة التي لا تتجاوز ميزانية‬، ً‫ نفذت الحكومة ال ٕاندونيسية عدة سياسات ؛ أولا‬، ‫تشير نتائج واستنتاجات هذه الدراسة إلى أنه خلال فترة النظام الجديد‬
‫ يتم تمديد الضرائب التي لا تزال بسيطة على الفور لتشمل الكائنات الضريبية ويتم إجراء تحسينات على طريقة تقدير الضرائب‬، ‫ وثانًيا‬، ‫ال ٕايرادات المحلية‬
.‫ يتم توجيه النفقات الحكومية نحو أهداف تشجيع الاستخدام الأقصى للموارد المحلية‬، ‫ تسعى النفقات الحكومية للبرامج التي تتلقى رابًعا‬، ‫ وثالًثا‬، ‫وتحصيلها‬
‫ إسلامي‬، ‫ اندونيسي‬، ‫ السياسة المالية‬:‫الكلمات المفتاحية‬

Abstrak
Kajian ini membahas tentang kebijakan fiskal di Indonesia (apakah sesuai dengan prinsip ajaran islam). Tujuannya untuk
menguraikan implementasi nkebijakan fiskal di Indonesia. Tulisan ini juga membahas tentang implementasi dari kebijakan
fiskal dalam perspektif ekonomi Islam. Penelitian ini merupakan penelitian kualitatif, dengan menggunakan buku-buku
dan artikel-artikel akademis sebagai metode analisis. Hasil dan kesimpulan dari penelitian ini menunjukan bahwa pada
masa orde baru pemerintah Indonesia melaksanakan beberapa kebijakan; pertama anggaran belanja negara yang tidak
melebihi anggaran penerimaan dalam negeri, kedua perpajakan yang masih sederhana segera diperluas pada objek pajak dan
dilakukan penyempurnaan cara penaksiran pajak dan cara pengumpulannya, ketiga, pengeluaran pemerintah diusahakan
untuk program yang mendapat prioritas, keempat pengeluaran pemerintah diarahkan pada sasaran untuk mendorong
pemanfaatan sumber-sumber dalam negeri secara maksimal.
Kata-kata Kunci: Kebijakan Fiskal; Indonesia; Islam

Introduction

The state is the highest authority in formulating a policy. Government policies that often directly intersect and
influence the climate of community activities are policies in the economic sector. One of the important policies that
are within the government’s authority is fiscal policy, in which the state plays a role in regulating economic activity in
order to maintain the stability and welfare of its people so that it can help to overcome the fundamental problems of
poverty and unemployment. At the very least, the function of the Government in the national economy is to make
efforts to increase the efficiency of the national economy, increase justice with regard to the distribution of income
between groups in society, seek economic stability, and regulate taxation and state spending.
In the historical records of Islamic civilization, the state also functions as a vital role holder in regulating economic
policies that are built on the principle of the benefit and welfare of the people. The form of role of the state in Islamic
history on this issue is regulated through the Baitul Mal institution (Karim, 2004: 59). The assets collected in the
Baitul Mal are allocated to people who are entitled and spent to pay for services provided by individuals to the
ISLAMICATE INSTITUTE Publication 2

state, overcoming poverty and hunger, benefits and providing employment, business capital for the community,
infrastructure development and public services, and others.
Fiscal policy is defined as a policy action taken by the government, which is related to income and expenditure of
money (Ibnu, 1983: 46). What is meant here concerns the management of state revenues and expenditures carried out
by the government of a country. Indonesia’s fiscal policy is reflected in the State Expenditure Budget (APBN). In the
APBN, there is a government stipulation regarding the allocation and distribution of state finances. Given the urgency
of this field in developing the country’s economy, the APBN must obtain approval from the House of Representatives
as the embodiment of the people. In addition, the Indonesian Ministry of State Finance as a state agency that manages
financial matters plays an important role in fiscal policy.
In Islamic countries, the management of state finances is handled by the Bayt al-mal. Bayt al-Mal is the same as
the ministry of finance (treasury) which handles financial matters as well as matters relating to the state treasury
(national excheguer). Even though Bayt al-mal was institutionally formed by the caliph Umar ibn Khattab. The state’s
fiscal policy had actually been enacted during the time of the Prophet SAW. Al-Quran and as-Sunnah often allude
to the state’s fiscal policy. Among others: the management of zakat by the state, the collection of al-jizyah from the
ahl-kitab, the enactment of al-fay’ and al-ghanimah laws, as well as the Prophet’s policy on public ownership.
If fiscal policy has been formulated in Islam, the question then is whether this formulation can be reinterpreted
according to regional conditions and the period, bearing in mind that fiscal policy is a state matter that is open to
ijtihad? If reinterpretation is possible, the next issue is whether the principles of fiscal policy established by the
Indonesian state government so far have in common with the principles of fiscal policy in Islam? Then, what form of
interpretation of fiscal policy in Islam is in accordance with the Indonesian context?
The answers to the questions above will be presented in this paper. In addition, this paper is aimed at seeking
Islamic legitimacy for the fiscal policies set by the Indonesian state government. So that the discussion does not
widen, the Islamic state will be limited to the time of the Prophet SAW and al-Khulafa’al Rasyidin because at this time
Islamic teachings were still not contaminated by other cultures. The Indonesian state government was only focused
on an economically stable government (New Order) because during this period the Indonesian economy was more
stable than before or after.

Literature Review

Harold D. Laswell and Abraham Kaplan define policy as a program of achieving goals, values and directed practices.
An expert, James E. Anderson, formulates policy as the behavior of a number of actors (officials, groups, government
agencies) or a series of actors in a particular field of activity. Fiscal policy or what is also known as budget policy is a
policy carried out by the government through fiscal policy instruments such as regulation of state expenditures and
state revenues aimed at influencing the level of aggregate demand in the economy (Turmudi, 2019).
According to Dornbusch et.al. (2011) fiscal policy is a policy taken by the government related to the level of
government spending and transfers as well as the structure of taxation. While the definition according to Hubbard
et.al (2012) regarding fiscal policy is government policy in regulating changes in taxes, spending and government
transfers that aim to influence macroeconomic conditions (Daryono, 2019).

Theoretical Review

Fiscal policy is basically a policy that regulates state revenues and expenditures. State revenues originating from
taxes, non-tax revenues, and even revenues originating from foreign loans/assistance from abroad prior to the reform
period are categorized as state revenues (Soesastro, 2005: 335). Thus fiscal policy is government policy in managing
state finances in such a way as to support the national economy: production, consumption, investment, employment
opportunities, and price stability. This means that state finances are not only important for financing the government’s
routine tasks, but also as a ”means” for realizing development goals: economic growth, stability and equal distribution
of income (Gilarso, 2004: 148).
If government spending is greater than tax revenues for a certain period of time, generally one year, then the
government is experiencing a budget deficit. Conversely, if tax revenue is higher than government expenditure, then
the government experiences a budget surplus. The government finances the budget deficit by borrowing, whereas
when there is a budget surplus, the government’s debt burden is relatively lighter (Mishkin, 2008: 15-16).
Thus, fiscal policy is the management of state finances and is limited to sources of revenue and state expenditure
allocations listed in the APBN (Parcoyo and Antyo Parcoyo, 2004: 22). Among state revenues such as customs and
excise, foreign exchange, tourism, income tax, land and building tax, imports, and others. As for state spending, for
 Journal of Economicate Studies 3

example spending on weapons, aircraft, government projects, construction of public facilities and infrastructure, or
other programs related to people’s welfare.
Suminto, (2004)Fiscal policy is one of the broad sub-sectors of state financial management, in addition to the
monetary management sub-sector, and the state wealth management sub-sector. The fiscal management sub-sector
includes six functions, namely:
(1) The function of managing macroeconomic and fiscal policies. The management function of this macroeconomic
and fiscal policy includes the preparation of Financial Notes and the State Budget, as well as developments and
amendments thereto, policy analysis, evaluation and forecasting of macroeconomic developments, state revenues,
state expenditures, financing, policy analysis, evaluation and estimation of fiscal developments within the framework
of international cooperation and regionally, preparation of state revenue plans.
(2) Budgeting function. This function includes the preparation, formulation, and implementation of policies, as well
as the formulation of standards, norms, guidelines, criteria, procedures, and provision of technical guidance and
evaluation in the APBN sector.
(3) Tax administration function.
(4) Customs administration function.
(5) Treasury function. The treasury function includes the formulation of policies, system standards, and procedures in
the field of implementation of state revenues and expenditures, procurement of goods and services for government
agencies as well as central and regional government accounting, implementation of state revenues and expenditures,
management of the state treasury and planning of revenues and expenditures, management of domestic debt and
abroad, management of receivables, management of state property/assets (BM/KN).
(6) Financial supervision function. According to Boediono, there are three main functions of fiscal policy, namely: First,
the function of allocation is to allocate production factors available in society in such a way that people’s needs for
goods and services can be met. Second, is the function of distribution, which basically has the goal of implementing a
fair distribution of national income. Third, the stabilization function, namely ensuring stabilization in the government
of a country, included in this function is the maintenance of a high level of employment opportunities, a relatively
stable price level, and an adequate level of economic growth (Supriyanto, 2005).

Previous Research

Muhammad Fauzan, with the title of fiscal policy in the Islamic economy during the Caliph Umar bin Al-Khathab, in
2017. The data collection technique used was library research which used a qualitative approach. Library research
(library research) is a descriptive analysis that describes the entire biography of Umar bin Al-Khathab and the dilemma.
Umar bin Al-Khathab economically, especially in terms of fiscal policy. Data on Umar bin Al-Khathab’s policies in
economic matters, especially in terms of fiscal policy can be traced in the works of scholars, researchers and historians
who wrote about Umar bin Al-Khathab. While the data related to this research were traced to secondary and tertiary
study sources and previous research. After the data has been successfully collected, grouped, categorized, and
discarded data that does not need to be obtained will be analyzed carefully. The results of this study indicate that the
economic policy (persistence) carried out by Umar bin Al-Khathab was a policy (persistence) that was in accordance
with the conditions of society at that time. The economic policies made by Umar bin Al-Khathab were based on the
Qur’an, Hadith, or the perseverance of Umar bin Al-Khathab or friends at the time (Fauzan, 2017).
Anisa Dwi Aprilia, Darsono, Agustono, with the title analysis of fiscal and monetary influences on employment in
the agricultural sector in Indonesia, in 2017. The basic research method used is analytical descriptive. The research
location was chosen purposively (intentionally) in Indonesia. The data used is secondary data from 2000 to 2014.
This study uses an Ordinary Least Square (OLS) model approach using SPSS. The results of this study indicate that tax
revenues, non-tax revenues, government spending in the agricultural sector, interest rates, and the money supply
together have a significant effect on employment in the agricultural sector. Tax revenues and the amount of money in
circulation partially have a significant effect on employment in the agricultural sector in Indonesia, while non-tax
revenues, government spending in the agricultural sector, and interest rates partially have no significant effect on
employment in the agricultural sector in Indonesia.

Method

The method used in this article is qualitative research, namely data obtained from literature related to the subject
matter. This research uses literature or library research or library research. The literature review is a study carried out
to solve problems, which basically rests on a critical review of relevant literature materials. Data collection techniques
ISLAMICATE INSTITUTE Publication 4

were carried out by reading literature, both literature which is a source of primary data, and literature which is a source
of secondary data. The data analysis used in this research is descriptive, that is to describe the problem as it is (Tim,
2019).

Result and Discussion

Implementation of Fiscal Policy in Indonesia (New Order Era)(Wayan, 2019)

The determination of the system and the success of fiscal policy is largely determined by the experience and history
of its application in the management of a country. In reality, fiscal history is formed due to situations or conditions of
government revenue sources from one period to the next, both due to foreign and domestic influences. For the source
of income for the Indonesian government in 1951-1958, most of it depended on foreign trade income (Anne Booth).
After this period, especially in 1958-1968, the government’s income from foreign trade began to decline, behind other
revenues it could not compensate, so that the government had difficulties in obtaining development funds, then the
government set a deficit budget.
To cover the budget deficit, the government sought foreign aid and borrowed funds abroad, which ultimately
resulted in rising domestic prices or inflation, which then was the initial round of Indonesia’s economic collapse
(RM Sundrum, 1973). Under these conditions, starting from 1969-1997, the so-called New Order era, the Indonesian
government implemented several policies:
a. The state budget that does not exceed the domestic revenue budget. For this reason, it is hoped that government
savings will continue to increase in tandem with the recovery in economic conditions.
b. Taxation, which was still simple, was immediately extended to tax objects and improvements were made to the tax
assessment and collection methods.
c. Government spending is sought for programs that receive priority.
d. Government spending is directed towards the goal of encouraging maximum utilization of domestic resources.
In relation to that, in Pelita II or 1974/75 to 1978/79 the tax on oil companies almost reached 50 percent of central
revenue and this had an impact on fiscal policy, namely:
a. With this revenue there is an increase in real government spending, but domestic revenue does not increase because
taxes are not perfect.
b. The tax on oil companies received at that time was actually part of the oil company’s calculations so it had no effect
on domestic purchasing power or even caused inflation.
In subsequent developments, especially in the 1980s, non-oil tax income amounted to less than 30% of total tax
revenue or only 25% of the total expenditure budget (Anne Booth). Of course, this greatly disappointed the Indonesian
government because at that time there was also a decline in oil revenues. Until the beginning of Pelita III or in 1979/80
this problem became a serious problem for the Indonesian government so the Indonesian government intensified
the determination and collection of taxes. Starting in January 1981 the Indonesian government made changes to
the overall tax so that the non-oil tax performance became better because in Pelita V or 1989/90 to 1993/94 it was
predicted that there would be a sharp decline in foreign aid.
Tax changes can be seen in terms of central government revenue patterns, developments in non-oil domestic
revenues, and tax policy reforms.
a. Central Government Revenue Pattern
In the period 1967-1975 central government revenues increased rapidly, namely approximately 10% or greater
than 20% of Gross Domestic Product or GDP and almost all of them came from oil (Anne Booth). This state revenue is
grouped into:
a) Non-oil domestic revenue, which is divided into:
1) Direct tax;
2) Indirect taxes; and
3) Non-tax revenue.
b) Oil tax revenues.
c) Receipts from abroad such as loans and assistance.
 Journal of Economicate Studies 5

In this period, the government has not made loans from banks, such as by issuing government bonds. From this
condition, it can be seen that the direction of the tax revenue pattern in the 1967-1975 period was:
a) Increased taxes on oil companies.
b) Taxes from non-oil are still low.
c) Very low indirect taxes.
d) Increased receipts for project assistance and export credit.
With efforts to improve tax policy, in the 1990s the pattern of tax revenue was reversed when compared to the
1967-1975 period, namely:
a) Taxes on oil companies decreased.
b) Non-oil taxes increased.
c) Indirect taxes do not go down.
d) Receipts for project assistance and export credits decreased slowly.
b. Development of Non-Oil Domestic Revenue
In Pelita I or 1969/70 to 1973/74 direct taxes in the form of corporate taxes, MPO and sales taxes increased sharply
but indirect taxes such as Ipeda (regional development contributions) and excise taxes increased rather slowly. This
condition illustrates that the government should intensify taxes on individual or corporate income and taxes on
residential land in urban areas. In this period no export taxes were implemented due to increasing foreign trade
behind the increase in import taxes. Taxes are one of the government’s revenues in addition to foreign aid. The average
foreign aid to development spending in Pelita I was around 57%, Pelita II was around 36%, Pelita III was around 30%,
and Pelita IV was around 50% (Umar Basalim, 1993).
At the beginning of Pelita III or 1979/80-1980/81 there was a bright hope for income tax revenue or VAT due to
the enactment of the 1981 tax reform. In the following year, namely 1988 or at the end of Pelita IV or 1988/89 Value
Added Tax or VAT increased three times compared to 1983 even though the land and building tax or PBB was still small.
During 1983 to 1988 the potential to increase VAT was still high, namely 53% and PPh 35% (Marie Muhammad, 1988).
The initial APBN Pelita V or 1989/90 was in line with the October 27, 1988 Package or Pakto 27, 1988, namely
an APBN that sought to increase the purchasing power of the wider community or for equity and soundness of the
balance of payments. Expenditure in the APBN is aimed at increasing the ability of the economically weak group,
absorbing labor, and increasing national income. It is a fact that in the 1989/90 APBN development expenditures were
financed with savings of 13.75% and 86.25% were financed from foreign loans. Therefore, the role of tax policy is still
very weak so that an increase in tax revenue is expected until now.
c. Tax Policy Renewal
The situation described above is a sign of success and renewal of tax policy which began in 1981. This reform was
carried out by the government because it was driven by a strong view that in the next Pelita, especially starting from
Pelita V or 1989/90 to 1993/94, there was a rapid reduction in reliance on foreign aid and on oil taxes so that non-oil
tax collection was intensified. In December 1983 and 1985 the House of Representatives approved Tax Laws, such as:
a. Law Number 6 of 1983 concerning General Tax Regulations and Procedures.
b. Law Number 7 of 1983 concerning Income Tax and Value Added Tax on Goods and Services and Sales Tax on Luxury
Goods.
c. Law Number 12 of 1985 concerning the United Nations.
d. Law Number 13 of 1985 concerning stamp duty tax.
Domestic revenue in the form of taxes is highly relied upon by the government because other domestic revenues
such as oil depend on world markets and OPEC policies and non-oil/gas export revenues also depend on import quota
policies, import levies, dumping and other policies. Tax policies can be flexible or springy in economic settings. Tax
reform includes aspects of formulating and making tax laws and regulations concerning economic utility, increasing
justice, equalizing burdens, increasing tax compliance, improving tax administration with legal certainty, providing
convenience and excellent service to the taxpayer community and trying to increase state revenues from tax. Truly
long before the times.
ISLAMICATE INSTITUTE Publication 6

Law Number 7 of 1983 concerning Tax reform, the first national tax reform was carried out, namely in 1983-1985,
the second tax reform was carried out in 1994 and 1997. The economy ahead of 2000, which was marked by an
economic crisis that emerged with the monetary crisis starting in 1997, made the government have to overcome it by
starting a new fiscal policy strategy so that people believed in sound fiscal management. The initial steps taken by the
government were fiscal consolidation to restore confidence and reduce fiscal bankruptcy, followed by more entrenched
fiscal reforms, tax reform, customs reform, budget reform, and finance department reform (Budiono, 2004). The
monetary crisis in 1997 had changed the condition of the state revenue and expenditure budget to become a deficit,
the real sector economy was stagnant and inflation was around 78%, foreign currency exchange rates increased, and
GDP fell 13%. After the banking recapitalization, the government’s debt became 96% of GDP or IDR 1,226.1 trillion
(equivalent to US$ 60.8 billion). Part of the debt is the result of Bank Indonesia’s liquidity assistance policy (BLBI),
bank guarantee policies, bank recapitalization policies, and diversification policies.
Fiscal Policy System
The fiscal policy system of the State of Indonesia has been stated in the 1945 Constitution article 23: 1. If the House
of Representatives does not approve the budget proposed by the government, the government shall carry out the
previous year’s budget; 2. All taxes for state needs based on law; 3. Types and prices of currencies are determined
by law; 4. Subsequent state financial matters shall be regulated by law; 5. To examine the accountability for state
finances, an Audit Board is held, the regulations of which are stipulated by law. The results of the inspection will be
notified to the People’s Representative Council.
The 1945 Constitution above gives a mandate to the government to always make a fiscal policy once a year which
is formed in the APBN. For this reason, the fiscal policy of the State of Indonesia follows the periodic principle. In
addition, fiscal policy also adheres to the principles of openness and flexibility. It is open because it involves the DPR as
the representative of the people, and is flexible as reflected in the provisions ”If the DPR does not approve the budget
proposed by the government, the government will carry out last year’s budget”. The APBN originates from the Draft
State Revenue and Expenditure Budget (RAPBN) which has been approved by the DPR. The RAPBN is drawn up by the
Minister of Finance together with the chairman of the National Development Planning Agency (Pappenas).
APBN includes state revenues and expenditures. State revenue consists of domestic revenue and development
revenue. Domestic revenues are also divided into revenues from oil and natural gas (oil and gas) and non-oil and
natural gas revenues such as tax revenues, both direct and indirect, and non-tax revenues. Suparmoko mentioned
nine sources of state revenue, including: taxes, fees, profits from various state companies, government-run fines and
confiscation, public donations for various services provided by the government, printing of banknotes, proceeds from
state lotteries, loans from abroad and within country and grants (Suparmoko, 1992).
Efforts to classify oil and gas and non-oil and gas revenues indicate that there is a dependence on state finances
on natural wealth: in fact, natural wealth is limited and can be used up. High-risk dependency, especially if there is
pressure on the price of kerosene from the international community (Suparmoko, 1992). This event was experienced
by the Indonesian government (New Order) so that it forced tax deregulation. For this reason, the government must
promote sources of revenue other than oil and gas (Mardiasmo, 1991).
Taxes or other levies received by the government must be based on the law. This is intended to avoid arbitrariness
on the part of the government. Besides functioning as a budget tool, taxes are also used as a tool to regulate and
supervise private activities in the economy. It is also important to note that tax collection in Indonesia uses a self-
assessment system, in which the taxpayers are fully entrusted with calculating, paying, and reporting the calculated
taxes themselves.
The principle of fairness and equity in tax collection can be demonstrated by a progressive system of income tax
so that the greater the income taxpayer, the greater the tax imposed. This is indicated by two reasons. First, the tax
administration is still open to bargaining practices so quite a lot of people have managed to avoid taxes, especially the
high-income group. Second, government policies are more protective of high-income groups. Therefore, it is often
the case that taxes are collected on employee income, not company-owned income. Tax collection also recognizes
tax-free (not subject to) income and tax exemptions. This means that there are certain criteria that are subject to tax
and are not subject to tax. Assets belonging to the state or public property are not subject to tax.
Meanwhile, state spending in the APBN consists of routine expenditure and development expenditure. Routine
expenditures include personnel expenditures, goods expenditures, subsidies, interest, and debt repayments as well
as other routine expenditures. Likewise, development spending is directed toward project financing and assistance.
All types of expenses, if assessed from the point of view of their functions, can be classified into five types. First,
self-liquidating expenses, in part or in whole. That is, government spending gets repaid by the people who receive
the services or goods in question, for example, spending on state companies or projects that produce export goods.
 Journal of Economicate Studies 7

Second, productive spending. That is, expenditures made to realize economic benefits for society. Thus, indirectly, it
can increase the amount of taxes, for example, spending on agriculture, education, and so on. Third, expenditures
that directly add to the joy and welfare of the people, for example, expenditures for tourism and disaster management.
Fourth, spending is a waste, for example, expenses for war expenses. Fifth, expenses that are future savings, for
example, spending to create jobs (Suparmoko, 1992).
Juridically, state spending must be directed to state objectives. The goals of the Indonesian state are contained
in the fourth paragraph of the 1945 Constitution. First, protect the entire Indonesian nation and all of Indonesia’s
bloodshed. Second, advancing the general welfare. Third, educate the life of the nation. Fourth, participate in carrying
out a world order based on freedom, eternal peace, and social justice. Thus, the priority for the distribution of state
finances must be directed to the economic, defense and security, education, and domestic and foreign political sectors.
Indonesia’s State Fiscal Policy (is it in accordance with the principles of Islamic teachings)
Indonesia’s State Fiscal Policy is not based on religious law but on laws and regulations. Pancasila and the 1945
Constitution are ideal and constitutional foundations for other laws and regulations. Even so, Pancasila and the
1945 Constitution still recognize the existence of religion, which also means religious law. Therefore, a fiscal policy
that is contrary to the objectives of religious law means that it is not in accordance with the will of Pancasila and the
1945 Constitution. Meanwhile, Islamic economics is part of religious law which regulates all the needs of society.
This community involvement makes Islamic economics not always dependent on textual texts, but provides greater
opportunities for ijtihad, and does not involve faith and intentions. Even so, Islamic economics must be in the corridor
of ”removing harm and attracting benefit” (dar’ al-mafasid wa jalb al-masalih) as a religious goal.
On that basis, all levies that are stipulated by law and become state revenue are still justified by sharia. Even the
Prophet SAW. Giving a mandate to the government to collect assets other than zakat. In this case, the caliph Umar
imposed an al-usyur tax which was never indicated by the Koran or Sunnah. Taqy al-Din al-Nabhani concluded that
the government is allowed to impose additional levies as long as the people’s needs have not been met by the state
(Taqy, 1996: 262). The purpose of tax collection by the Indonesian state government is no different from the purpose
of tax collection in Islamic countries. Apart from being a state revenue, tax collection is also intended to equalize the
income of the population. The Prophet SAW said: ”zakat is collected from rich people for poor people (Al-Bukhari, 1981:
108)”. Here the author equates the purpose of zakat with taxes because both are progressive, namely the collection is
imposed on predetermined income. Thus, economically weak people are not collected taxes or zakat, they will even
get a share of the zakat or tax.
Apart from taxes, the largest source of revenue for the State of Indonesia is the sale of oil and natural gas (oil and
gas). Oil is one of the basic needs of society. Therefore, oil cannot be controlled by the private sector, but must belong
to the state. This has been confirmed by the 1945 Constitution article 33 paragraphs 2 and 3.
2) The branches of production which are important for the state and affect the life of the people at large are controlled
by the state.
3) Earth and water and the natural resources contained therein are controlled by the state for the greatest prosperity
of the people.
The above article is explained by article 2 paragraph 2 of Law Number 5 of 1960 which states that the state’s
control rights include: first, regulating and administering the allotment of the use of supplies and maintenance of
earth, water, and space; secondly, determining and regulating legal relations between people and the earth, water and
space; third, determining and regulating the relations of earth, water, and space (Boedi, 1996: 6).
On that basis, the state has the right to manage and maintain natural resources which are the livelihood of the
people, as well as being able to collect fees on the people who use them. If natural resources have productive value, the
state is required to spend them for the public interest. Such a policy was once carried out by the caliph Umar on the
land of Sawad in Iraq. The result is that the country benefits by receiving about a hundred million dirhams. Mastery is
in line with the wisdom of the Prophet Muhammad. Who once gave mine to Abyad ibn. Hamal. Then, he pulled back
the mine after there was a report that the mine had potential and the results were abundant like flowing water. This
hadith can be the basis for the Indonesian government’s policy regarding State-Owned Enterprises (BUMN).
Other fiscal policies worth highlighting are foreign debt and state lottery. These two policies were never carried out
by the Islamic government during the time of the Prophet and the Khulafa al-Rashidin. The needs of the state in the
classical period can be met by expanding to other countries. This expansion cannot be carried out by the government
of the State of Indonesia considering that the State of Indonesia is bound by international law. Therefore, the way out
is to seek loans from abroad; even though the loan pays a lot of interest. Among Islamic jurists, the loan interest is still
being debated.
ISLAMICATE INSTITUTE Publication 8

In contrast to foreign loans, state lottery is legally and sociologically unacceptable to society because it is considered
gambling. For this reason, it is considered that state revenue through a lottery will not last long. Thus, lottery as state
revenue must be rejected because it contains many dangers so that it is contrary to Islamic law.
In terms of state financial expenditure, there is no significant difference between the Islamic state and the In-
donesian state. Even though the fiscal policy of the Indonesian State is based solely on ijtihad, the orientation of
state spending is directed towards the prosperity of the country. The prosperity of the country includes two main
goals, security and welfare of the people. Both of these targets have been mandated by the 1945 Constitution to the
government of the State of Indonesia or the Koran to the Islamic government. Thus, political stability and economic
growth absolutely must be prioritized by every country.
Even though the State of Indonesia and the Islamic state during the time of the Prophet SAW. And al Khulafa’
al-Rashidin is separated by quite a long time and hindered by different cultures, Islamic shari’ah, as its original
character, remains flexible for all times and regions. This assumption contains the understanding that the fiscal policy
of the early Islamic state could be reformulated according to the legal and cultural order of the Indonesian people.
The source of revenue for the Islamic state that is not implemented in the State of Indonesia is al-ghanimah. Other
sources of state revenue, according to the author, have been implemented by the Indonesian government. It’s just
that the implementation mechanism is different from what was done by early Islamic countries. Nevertheless, the
principles and objectives of the collection have much in common.
Al-usyur, for example, is a tax levied for protection for importers that is collected by an asyir within the jurisdiction
of an Islamic state (Mannan, 1995: 254). The fees are different for Muslims and non-Muslims. The reason is because
Muslims have been subject to zakat so that the levy is smaller than non-Muslims. In addition, requests for protection
by non-Muslim merchants to Islamic governments are greater. In Indonesia, this al-usyur tax can be equated with
value added tax (VAT). Value added tax objects are not only in the form of goods, but also goods delivery services.
Value added tax also collects fees at each stage of value added of an item even though the goods are not imported from
abroad (Suparmoko, 1992: 78). The similarity with al-usyur lies in the tax object in the form of imported goods and its
purpose is to maintain domestic trade.
As al-kharraj can also be equated with Land and Building Tax (PBB). Land is an object of al-kharraj tax as well as
land and building tax. Early Islamic countries did not recognize industrialization, so the tax object was only land,
while the Indonesian state imposed land and buildings because land use was not only for agriculture, but also for
setting up companies and offices. Likewise, the amount of levy al-kharraj or property tax depends on government
policy. Both are levied so that the community always utilizes the land and there is no uncontrolled distribution of
land. It should also be noted that land and building taxes are regressive, that is, the tax is imposed on every citizen
who owns land or buildings. In contrast to al-kharraj which was imposed on land that had been controlled by the
Islamic state (Mannan, 1995: 250).
Unlike al-usyur and al-kharraj which do not distinguish Muslims from non-Muslims, al-jizyah is imposed on non-
Muslims. Al-jizyah can be levied when an Islamic state has full power over non-Muslims and there is no international
agreement to reject expansion into other countries. Surat al-Taubah: 29 which is the basis for al-jizyah was revealed
after the Prophet SAW. Migrating (Madaniyah, i.e. Arabia and conquering the newly established Islamic state).
In general, commentators put forward the superiority and glory of Islam as the reason for the withdrawal of
al-jizyah against people of other religions which are considered low and heretical teachings. Meanwhile, the jurists
of the Syafii school of thought and Ibn al-Qayyim interpret al-sighar in compliance with the provisions of Islamic
law. That is, the conquered population had to follow various provisions of Islamic law. The author himself prefers the
latter interpretation, because humiliating people of other religions, let alone forcing them to follow Islam, is clearly
contrary to Islamic teachings.
Withdrawal of al-jizyah towards able-bodied non-Muslim adult men, specifically shows the absence of a faith
relationship in the procurement of al-jizyah. Al-jizyah only considers the welfare aspects of citizens. In this regard, M.
Abdul Mannan writes: “In a primitive socio-economic environment, withdrawing al-jizyah is perhaps the best option,
because this is in accordance with the natural principle of justice. Every citizen must pay his obligations to maintain
internal security and prevent attacks from outside, regardless of whether he is Muslim or non-Muslim” (Mannan,
1995: 250).
History also records that the caliph Umar once returned al-jizyah because the Islamic state was no longer able to
protect the security of non-Muslims. In fact, non-Muslim residents who fought to defend the country were exempt
from al-jizyah levies (Arnold, 1995: 93). This phenomenon will strengthen the connection between al-jizyah and the
obligations of citizens to defend the state, not al-jizyah and the religion of citizens.
 Journal of Economicate Studies 9

In the Indonesian context, al-jizyah can be equated with income tax (PPh) which is collected from Muslims and
non-Muslims. These two levies are imposed on the income of citizens so that people who earn low incomes are not
subject to (progressive) taxes. In Islamic countries, al-Jizyah is a balance of zakat collection on Muslims. When Law
Number 33 of 1999 concerning the management of zakat was passed by the MPR, Indonesian Muslims were no longer
burdened with paying taxes and zakat. In article 14 paragraph 3 it is stated that the payment of zakat automatically
reduces the tax burden. If the policy is implemented, surely there will be justice between Muslims and non-Muslims.
The unification of taxes in zakat requires the authority to manage zakat by the Ministry of Finance. For this reason,
zakat must first be understood as a social obligation for Muslims. Zakat must be placed in the discourse of muamalah
rather than worship because zakat is the cornerstone of Islamic teachings concerning socio-economics in order to
create a just and prosperous society, materially and spiritually equitable (Permono, 2001: 1). Nash who explains zakat,
both regarding its source and distribution, is open to interpretive ijtihad. Ijtihad must be pursued in accordance with
the context of the society faced (Permono, 1992: 82–83).
Departing from the understanding of zakat as a social discourse, the Indonesian government can make zakat a
source of state revenue. However, the distribution of zakat must be allocated for the welfare of the grassroots, both
Muslims and non-Muslims. For this reason, zakat funds must be separated from other sources of income. As for other
sources, such as salaries and employee benefits, spending on goods and so on.

Conclusion

As part of Islamic economic discourse, fiscal policy in Islam is flexible and open to ijtihad. The texts related to fiscal
policy are inseparable from the socio-historical conditions of early Islamic society. The interpretation must use a
contextual approach. The direction and objectives of the fiscal policy stated by the text must be a parameter for each
country’s fiscal policy even though the models and mechanisms are different.
With the above formulation, the authors found a point of similarity in the principles and objectives of Indonesia’s
fiscal policy. In fact, several types of taxes collected by the government are tax reformulations implemented in the
early days of Islam. Thus, the fiscal policy system of the Indonesian State so far is still in the corridor of shari’ah. It’s
just that the implementation of the system is still far from what was expected, if not to say the opposite.
If there are many common points, the government can implement Islamic state fiscal policy as long as it conforms to
Indonesian law and culture. In this case, the authors put forward the idea of the need to receive zakat as a source of
state revenue. The institution authorized to manage it is the Ministry of Finance of the State of Indonesia because this
authority concerns efforts to unify taxes and zakat.

Bibliography

Al-Bukhari. (1981). Sahih al-Bukhari. Toha Putera. ( 7 ).

Arnold, W. T. (1995). The Preaching of Islam. Low Price Publications. ( 8 ).
Boedi, H. (1996). Hukum Agraria Indonesia. Djemabatan. ( 7 ).
Daryono, S. (2019). Kebijakan Perencanaan Dalam Pembiayaan Anggaran Defisit. Membangun Ekonomi Yang Mencer-
ahkan, 57 ( 2 ).
Fauzan, M. (2017). Kebijakan Fiskal Dalam Perekonomian Islam Di Masa Khalifah Umar Bin Al-Khathab. HUMAN
FALAH: Jurnal Studi Ekonomi dan Bisnis Islam, 4(1). https://doi.org/10.30829/hf.v4i1.821 ( 3 ).
Ibnu, S. (1983). Dasar-dasar kebijaksanaan keuangan negara (Vol. 1). ( 2 ).
Mannan, M. A. (1995). Teori dan Praktek Ekonomi Islam. PT. Dana Bhakti Wakaf. ( 8 ).
Mardiasmo. (1991). Perpajakanl. Andi Offset. ( 6 ).
Permono, S. H. (1992). Pendayagunaan Zakat Dalam Rangka Pembangunan Nasional. Pustaka Firdaus. ( 9 ).
Permono, S. H. (2001). Pendayagunaan dan Pengelolaan Zakat Dalam Kaitannya Dengan UU No. 38 Tahun 1999.
Disampaikan dalam Temu Ilmiah Program Pascasarjana IAIN Se-Indonesia pada tanggal 10 – 12 Nopember ( 9 ).
Soesastro, d. (2005). Pemikiran dan Permasalahan Ekonomi di Indonesia dalam Setengah Abad Terakhir. Kanisius. ( 2 ).
Suparmoko. (1992). Keuangan Negara dalam Teori dan Praktikl. BPFE. ( 6–8 ).
Taqy, N., al-Din. (1996). Membangun Sistem Ekonomi Alternatif Perspektif Islam. Risalah Gustie. ( 7 ).
ISLAMICATE INSTITUTE Publication 10

Tim, R. (2019). Buku Pedoman Penulisan Skripsi Fakultas Ushuluddin dan Pemikiran Islam. UIN Raden Fatah Palembang.
( 4 ).

Turmudi, I. (2019). Kajian Kebijakan Fiskal dan Kebijakan Moneter dalam Islam. An-Nawa: jurnal studi islam, 1(2),
74–90. https://doi.org/10.37758/annawa.v1i2.143 ( 2 ).
Wayan, S. (2019). Kebijakan Fiskal dan Moneter Teori dan Empirikal. Kencana Prenadamedia Grup. ( 4 ).
INDEX

Keyword, 1

11