Indonesia to adopt a height tax?

The Indonesian government has decided to make life tough for foreign advertising companies.

Under the new law, all ads shown on Indonesian TV must feature Indonesian actors and actresses only, and must also be domestically produced – ie ads made overseas will not be allowed to be shown. Not quite sure how this is gonna work in practice, but if true then the Marlboro Man can wave goodbye to any chance of making a comeback in this country (and just where the heck has he been in the last few years anyway?).

Having said that, Indonesia shouldn’t have too much trouble finding a few cowboys of its own – there are quite a few around!

Meanwhile, the tax authorities in Batam have decided to levy an exit tax on those foreign devils based on the island, who, for some reason or another, are slinking over to Singapore at the weekends. Not for sordid pleasures mind you – if they wanted that they would stay in Batam – but for things like access to well-stocked bookstores and super fast internet access.

But what is really interesting is that the Indonesian government has taken heed of some groundbreaking research done in the States and will, according to reports, soon impose a special “height” tax.

By adopting a utilitarian framework for tax policy analysis, the researchers at Harvard have shown - quite conclusively - that such a policy is rational and effective given that tall people statistically have much higher incomes than shorter people. Download the research report (Mankiw/Weinzierl 2007)
here (right click, save as), if you wish, but the report’s conclusion is pretty clear:

In conventional analysis, the planner observes only income, which depends on ability and effort, and is deterred from the fully egalitarian outcome because taxing income discourages effort. If the planner’s problem is made more realistic by allowing him to observe other variables correlated with ability, such as height, he should use those other variables in addition to income for setting optimal policy. Our calculations show that a utilitarian social planner should levy a sizeable tax on height. A tall person making $75,000 should pay about $4,500 more in taxes than a short person making the same income.

In Indonesia’s case, the height advantage is clearly apparent of course. Just check out the height of the people milling around at an upmarket cinema (like the one in Plaza Indonesia for example) compared to the height of people queuing to watch a soft porn movie at the rat-infested sleaze-hole in Senin. The difference in the average height of the movie goers can easily be explained: rich people who eat well are much taller than their malnourished brethren.

Another bonus for the Indonesian government is that the height tax will implicitly target foreigners, who, of course, are generally taller on average. And there’s also no chance of a moral hazard – we aren’t going to have people hacking off their legs just so that they don’t have to pay the tax.

All in all a sound policy. At least Yusuf Kalla seem to think so. Although SBY isn’t so sure!


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