Taxation Principal

There are five characteristics of any tax system (Stiglitz, 2000). The legal
framework and design principles of tax will be assessed to determine to
what

extent

the

laws

surrounding

that

environmental

market

appropriately. It measured by five the dimension of good tax scheme

including principle of Efficiency, Administrative simplicity, Flexibility,
Political Responsibility and Fairness.
Efficiency principle is constructed on the theory that we would make our
optimum utility maximizing choices in a perfectly competitive market. An
efficient tax is not distortionary (Stiglitz, 2000). Meaning that it does not
affect the choices, which would have been made in the absence of the
tax. To design an efficient tax is to attempt minimizing the costs choices
foregone in imposing a tax. By implementing tax system, government
should aim to enhance economic efficiency that affecting involved
parties.
The case of food waste taxes will beneficial for each party in food supply
chain also government. Levying tax on food waste will cut the operating
cost of producers by almost one fifth overall. Actions such as minimizing
the unused ingredients and implying high technology on processing and
distribution should be executed. Food and Agriculture Organization of the
United Nations (FAO) reported in 2011, in the developing countries, the
concentration of food wastage occurs toward the production chains.
Lacking technology and infrastructure for distribution and processing
results expanded losses to pests, spoilage, and weather are several
problems accounting developing countries like Indonesia.
Magnifying the use of food available for consumption in every supply
chains then leads to broader efficiency on higher levels of parties. The
more efficient food used, the less food farmer need to produce. Thus
then, reduces pollution on air also water caused by pesticides and

compress the water consumption also invigorate land occupation. This

negative externalities could have been reduced by corrective taxation;
the tax that simultaneously raise revenues and improve efficiency of
resources allocation (Stiglitz, 2000). This led up to economical efficiency
for farmers, producers, consumer, government also society.
Administration Simplicity A tax also intrudes a cost of collection. The
higher the ratio of revenue gathered; the more administratively proficient
the tax (Cullis and Jones, 2009). Taxes further impose costs on those who
have to pay it, in the form of time and resources required to comply. If
compliance costs are higher than those of avoiding the tax legally,
resources could be shifted from productive undertakings origins to tax
avoidance, depressing the global welfare. If compliance expenses are
greater than the costs of proscribed evasion, there is an encouragement
for black market endeavor. Thus, The tax system should have low cost of
administration cost and compliance
To overcome the administrative burden, Government should have
provided a framework to manage the food waste. Adopting from Former
country that implementing the food waste tax like UK, to be able to
realize this Tax system, Indonesia should established Waste and
Resources Action Program (WRAP) to better monitors, regulates and
enforce the issues.
Taxpayer accustomed that they must comply with the laws and
regulations of tax and customs duty. Conversely, The taxpayers behavior
in Indonesia has deficiency of awareness. They are not commonly
complying with the tax regulation. The corruption for tax collection on the
higher level of tax institution is one of the motives of tax payment
hesitancies among society. Consider the issues of majority of Indonesian
taxpayers are not compliance; It is vital to regularly monitor the

implementation of the tax structure, specifically, on remotes area of

Indonesia.
Flexibility Principle is when the tax system is adaptable to changed
economic circumstances. As the developing country, Indonesia economic
condition is turmoil to changes and requires the adjustable tax system.
Food waste tax configuration ratifies automatic stabilization by using
progressive tax structure. Progressive tax exerts better when the prices
are stable.
Flexibility is also to determine who is compulsory to pay tax. Considering
ability to pay proposition, the taxes should be levied on a person
according to how well that person could shoulder the burden. There are
two types of the ability to pay proposition. Firstly, There is Horizontal
Equity, meaning that individuals in the same circumstances should pay
the same amount. Secondly, the vertical equity is when individuals in
different circumstances should pay different amounts (Stiglitz, 2000).
Merely, in the case of food waste taxation, the reasonable assertion is to
use vertical equity of progressive structure. A tax system is said to be
progressive when it takes proportionally more tax from those with a
higher ability to pay. Thus means, the more food wasted in certain units of
kilograms, the more tax should be imposed to the parties. Basically, big
corporations producing food waste allying food industry and its supply
chain will be levied more compared to individual consumer.
Political Stability The tax system should be transparent, this is
embraced when government not try to take advantage of uninformed
citizen (Stiglitz, 2000). The transparent tax involves clear knowledge of
those who is benefiting and who is paying the tax. Deliberating the
benefit proposition of taxes, in which people should pay taxes based on
the benefits they receive from government services.

Food waste is one of the negative externality forms. The impact of

polluted environment by the waste of the misuse food could therefore
increase health issues such as sickness or diseases spread. Food waste is
also an added cost to both the producers and other parties like
government to clean it up. Therefore, food waste is suitable for
government intervention in the form of taxation where both consumer
and producer or middle parties like retailer should be charged for the food
waste tax.
However, in Indonesia, government still needs to improve its services in
managing food waste as the implementation of the proposed food waste
tax. The intention is to enlarge the benefits received by the society. It will
be the challenges for Indonesia government to accomplish waste
management to supports the extensive welfares in the future.
Fairness The last dimension of tax system that tax should be seen to be
fair, considering those in similar circumstances similarly, and imposing
higher taxes on those who can better bear the burden of taxation (Stiglitz,
2000). As mentioned previously, the implementation of progressive tax
recompense higher tax amount on the higher waste producer. This
reflects the fairness principle.
Conclusion
Consequently, there are few reasons that make food waste taxes an
appealing instrument. Firstly, there are cost-effective motivations that
make food waste taxes desirable. Ideally, they should be able to achieve
lower expense related to the production and distribution activities.
Information and administrative costs must persist low. Additionally, the
tax must be carefully proposed to not to encourage obstinate incentives
or placing low tax fees causing failure in achieving change in industrial
and taxpayer behavior. Secondly, food waste taxes should incentivize
socially desirable behavior without removing individual free choice.

Lastly, food waste tax should able to internalize negative externalities

since the impact on environment is a public good with no fixed value or
property rights enclosed to it. To conclude, the key principles analyzed
with regard to the food waste tax are efficiency involving economic and
resources allocation, certainty (involving the administration simplicity and
compliance cost), flexibility of the application and their environmental
objectives (concerning political stability and fairness).

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