THE ROLE OF FISCAL POLICY IN REDUCING INCOME INEQUALITY IN INDONESIA

Abstrak

This study analyzes the role of fiscal policy in reducing income inequality in Indonesia from 2010 to 2025. Using a qualitative approach based on literature review and secondary data, the research explores how fiscal instruments, particularly progressive taxation, social spending, and infrastructure investment, contribute to income redistribution. The findings indicate that fiscal policy has moderately improved income equality, as reflected in the decline of Indonesia’s Gini ratio from 0.384 in 2021 to 0.375 in 2025. Progressive taxation and targeted social programs such as Program Keluarga Harapan (PKH), Bantuan Langsung Tunai (BLT), and the Pre-Employment Card have enhanced purchasing power among low-income groups, while infrastructure development has expanded economic access in underdeveloped regions. However, fiscal policy implementation still faces major challenges, including a low tax-to-GDP ratio, limited administrative capacity, and uneven budget realization across regions. The study concludes that effective fiscal synergy, combining equitable taxation, accurate social targeting, and inclusive infrastructure planning, is essential to achieving sustainable and socially just economic growth in Indonesia.