Local Govt Revenue

 Local Govt Revenue Essay

DRAFT MANAGING NEIGHBORHOOD REVENUE IN INDONESIA Raksaka Mahi *)

Prepared pertaining to: CAN DECENTRALIZATION HELP RESTORE INDONESIA? An appointment Sponsored by International Studies Program, Claire Young School of Coverage Studies, Georgia State School, Atlanta May possibly 1- several, 2002

Introduction The position of community owned earnings had been tiny for a long period of the time. In the past, nearly ninety percent of total district's earnings came from central government moves and financial aid. Moreover, all those transfers had been mostly for specific functions; such as Presidential Instruction Fund (INPRES) and salary spending fund (SDO). Therefore , there were a little freedom of community governments in their financing coverage. Such a predicament is supposed to change together with the implementation of regional autonomy laws. Equally Laws, No . 22/1999 without. 25/1999, are supported by additional laws and the implementing polices. Law Number 34/2000 is considered one of the most essential laws that support regional autonomy. It truly is basically a revision of Law Number 18/1997, which regulates types, tariff and administration regulation of local income taxes and other community revenues (retribution, local state owned earnings and others). Under Law *)

Doctor Raksaka Mahi is Vice Dean to get Academic Affairs at the Faculty of Economics, University of Indonesia (FEUI). The author is additionally Senior Analysis Associate by LPEM-FEUI, and member of the Assistance Team to get fiscal decentralization policy for the Minister of Finance, Republic of Indonesia. This

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No . 34/2000, there is even more flexibility of local government in generating their particular local revenues. The setup of Regulation No . 34/2000, however , would not guarantee that local government revenue raises significantly. These depend on types of revenue permitted to be collected, and the local government income optimizing technique. Law Number 34/2000 still limits neighborhood taxes to seven major taxes, which can be considered as nonbuoyant taxes. It means that the duty base can be not supple and fairly small. Moreover, local income strategy continues to be considered not optimal; hence, actual earnings is definately not the potential one. This daily news attempts to elaborate the issues and tricks of local government to obtain more neighborhood revenue from your available fees and consumer charges. Additionally, it evaluates the economic effects of unlawful local government polices. Based on earlier times performances, this kind of paper also suggests a number of improvements upon local taxes policy and administrations. Finally, this daily news ends the analysis with suggestions and recommendations for bettering the position of regional revenue in the regional autonomy era.

Local Revenue Generation Under Legislation No . 18/1997 Local held revenue contains mainly earnings from fees, charges, make money from local government corporations, and revenues from specialized units (" Dinas”). Community owned income has never been significant revenue pertaining to local government authorities, except for handful of regions which may have a good local tax foundation, such as parts with many resorts and restaurants. Most local revenue has a narrow duty base. From 1998, regional revenue has become guided legally No . 18/1997. This law was enacted to answer inefficiency problems related to the

paper is presented at the Atlanta State School Andrew Small School of Policy Research Conference,

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implementation of previous taxes and user charges. The Law No . 18/1997 has eliminated some taxes and customer charges that created economic distortion before. The followings are the key features of Law No . 18/1997: • Some distorted taxation and end user charges are completely removed. Some taxes/user charges had been abolished as a result of a high contortion on the overall economy. Such taxes/user charges include fees in interstate travel. Reduction upon tax foundation. There are some taxes that all their tax foundation had been limited by Law Number 18/1997, for example , the taxes on lodge and restaurant. Previously, the name of " Pajak Pembangunan” (development tax) was applied to any hotel, cafe and other foodstuff...

References: Mahi, Raksaka serta Adrian Panggabean, The Impact of the Crises upon Local Government Finances: Findings Based upon Field Survey in 22 Regions, Unpublished report to get The Ministry of Finance and US Clean Task, 1999. Ter-Minassian, Teresa, Fiscal Federalism theoretically and Practice, International Economic Fund, 1997. Shah, Anwar, and Zia Qureshi, Brian Binder, and Heng-fu zou, Intergovernmental Money Relations in Indonesia, Globe Bank Discussion Papers, 1994. Bahl, Roy and Wayne Alin, Decentralization in Dalam negri: Prospects and Problems, Doing work Report, USAID, June 99. Mahi, Raksaka, Robert Simanjuntak, Bambang Brodjonegoro and Karyaman Muchtar, " Alternative Regional Revenue and Tax Sharing”, 2000. UU No . 22/1999 UU Number 25/1999 UU No . 18/1997 UU No . 21/1997

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