Tax Justice and the Informal Economy in Indonesia: Rethinking Tax Obligations for Street Vendors and Micro-Entrepreneurs

Abstract

Indonesia's informal economy provides livelihoods for a large number of workers and micro-entrepreneurs who may operate outside formal business and tax structures. Street vendors and other informal entrepreneurs frequently have limited financial capacity, unstable income, and restricted access to administrative services. This article examines whether Indonesia's tax policies adequately reflect the economic circumstances of informal workers. Using normative juridical and policy analysis, the study evaluates income taxation, business formalization, simplified tax regimes, administrative requirements, and local taxation. The article argues that tax enforcement based exclusively on formal registration may disproportionately burden vulnerable entrepreneurs while failing to address the structural causes of informality. A justice-oriented approach should distinguish deliberate tax avoidance from economic informality arising from limited administrative capacity and livelihood necessity. The study proposes a graduated tax framework combining simplified registration, low-cost compliance, taxpayer assistance, and proportional enforcement. Local governments should also coordinate taxation with programs providing legal business status, access to markets, and social protection. The article concludes that tax justice in the informal economy requires a balance between revenue mobilization and the protection of livelihood security. Tax formalization should function as a pathway toward economic inclusion rather than merely an instrument of fiscal enforcement.