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authority of development
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However, on he regional
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More do only found i
pines. The ce sub-national
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grants Ichim vernmental f
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1992-2001. In
he largest ransfer cond
2007. DAU all
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t programs n of the DA
ivities demo overnments
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egional aut n the other
l governmen to formulat
ng in accor order to th
remain met ominant unc
n Indonesia entral gover
governmen block grants
or IRA an mura and B
fiscal transfe by a block g
percent per nversely to th
transfer ty ditional or sp
location to mula based
Source
Figure 5
Ju
overnments s and acti
AU allocatio onstrates the
to provide m come a class
nt since the onomy, on
side, on the nt must be
te programs dance with
he provision .
onditional tr , but also in
rnment tran nt are of two
s the intern nd ad hoc
Bahl 2008. ers, the tran
rant which year during
he case of U ype occupie
pecific purp the regions
on the cal
e: Finance Minis
5. DAU Allo The lowes
urnal Ekonom
to finance vities. The
n for deve- e limitation
more public sic problem
implemen- n one side.
e condition, e intelligent
and activi- h the main
n of public ransfers not
n the Philip- nsfers to the
o types: for- nal revenue
categorical In intergo-
nsfer type is grew by an
g the period United State,
ed by the pose Fisher,
is done by lculation of
stry, Finance No
ocations by P st and the lar
mi Pembang
basic dat the DAU
compone the DAU
Finance a lump-s
official e No. 33 o
compone the Basi
CF. DA ponent o
cial capa ence in
each reg are regio
or greate ences in
fiscal gap cal capac
relatively fiscal gap
Base the all
shows th ble. In 20
est recip of West
Java and province
ote various editio
Provinces in 2 rgest propor
gunan Volum
ta DAU. His U formula
ents: the min U allocation
e Note, 2009 sum compo
expenditure. of 2004, the
ents of PM ic Allocation
AU allocatio of inter-regi
ability, takin the fiscal n
gion. Based ons that rece
er than othe the fiscal ga
p that is fis city the regio
y large num p.
ed on the D province,
hat horizont 009, there ar
pient of DAU t Kalimantan
d Central J es as the lo
ons: processed d
2008 in billi rtion
me 13, Nomor storically sin
is divided nimum alloc
based on the . PM is calc
onent and th Since the en
e effective fo and KF are
n AD and on is based
ional equali ng into acco
needs and fi on the FG
eive less DA er regions be
ap. A region cal needs is
on receives mber compar
DAU allocat districtcity
tal inequalit re five provi
U allocation n, Papua, W
ava. While, west recipie
data
ion rupiah
r 1, Juni 2012: nce 2001 to 2
into two m cation AM
e fiscal gap culated based
he proportio nactment of
orce since 2 e perfected
d the gap F on the CF c
zation of fin ount the di
iscal capacit indicator, t
AU allocatio ecause of di
n that has a l greater than
the DAU wi red with a sm
tion formula y in Indon
ies are still nces as the l
that is Prov West Java,
there are ent of DAU
: 1-17 2005,
main and
KF d on
on of Law
2006, into
iscal com-
nan- iffer-
ty of here
on to iffer-
arge n fis-
ith a mall
a for nesia
visi- larg-
vince East
four U are
Implem
East K Jakarta
ducer receive
enough seem to
is inter eral D
such a Jawa B
trict. It i oil-p
as DKI 2009.
Th the DA
City. I Indone
from 3 Paser,
the ran Among
amoun shown
ance. I in a m
of fisca ment is
Th fund is
of 51 t
mentation of
Kalimantan, a. Those pro
in Indonesi e revenue
h. In 2009,
o occupy the resting for th
istrictsCitie as District B
Barat, Kutai t may be be
producing d I Jakarta rec
he situation AU allocatio
In 2008, fou esia received
33 to 37 bill while five d
nge from 95 g of them, B
nt of DAU, n the creatio
If the govern more significa
al decentral s increasingl
he second la s revenue sh
trillion per y
Source: Finan
Figure 6. D i
f Fiscal Dece
Riau, Riau ovince are th
ia and there sharing c
the four pr e same posit
his year is t es that do n
Bengkalis, R District, and
ecause of tw districts and
ceives PAD is different
on for the en ur of 542
d DAU alloc lion, the sm
districtscity 59 to 1.063
ogor City re 1.1 trillion.
n of inter-re nment does
ant for the f lization on r
ly unconvinc argest comp
haring DBH year for the
nce Ministry, Fin
DAU Allocat in billion rup
entralization
Archipelago he largest oi
efore they w
considered rovinces tha
tion in 2008. hat there ar
not receive Rokan Hilir,
d South Bur wo considera
ii own rev by 11.1 trill
when look ntire Distric
DistrictCiti ation in the
mallest is Pen y receives DA
billion Figu eceived the l
This fact ha egional fisca
not make e future, the im
regional dev cing.
ponent of ba H with an av
period 2001
nance Note vario
tion by Distr piah
Nursini o and
il pro- would
large at still
What re sev-
DAU Siak,
ru dis- ations:
venue ion in
ing at ct and
ies in range
najam AU in
ure 6 .
argest as not
al bal- efforts
mpact velop-
alance verage
1-2009 Fi
the DB
of rev
rev to
21 co
La M
so res
era na
str
the D
ing to
20 Or
inc or
Al an
tha the
ch
ous editions: pro
rictCity Sele
igure 4 . The
e fund balan BH is calcula
domestic s venues or re
venues deriv the region i
and PPh 25 untry, Land
and and B eanwhile, s
urces to be sources SDA
al mining, f atural resour
ry reforestati Transfer
e size of the DBH taxes an
g of the state the region
0.7 trillion in r during the
creased by a an average
lthough DBH nce, but the a
an the DAU e governme
hanisms of D In 2008, th
ocessed data
ected the lar
e DBH abso nce. Based o
ated based o shared reve
evenues of n ved from tax
include pers 5-29 of perso
d and Build uilding Tra
state revenu shared the r
A of petrole orestry, and
rce DBH als ion fund DB
of revenue e state reven
nd SDA. In e revenue re
has increase n 2001 to Rp
e period of r an average
e growth of H is only 27
average grow U, 16 percen
ent attention DBH is quite
he district or
rgest and sm
orbed of 27 on Law No. 3
on a certain p enue, either
natural resou x revenues th
sonal incom onal tax pay
ding Tax P ansfer Fee
ues from n region inclu
eum, natura d fisheries. S
so includes D BH DR.
sharing de nue realizati
line with th ealization sha
ed each yea p 85.7 trillio
realization 2 of 47 trillion
f 21 percent 7 percent of
wth per year nt. This indi
n to the fun significant.
r city that re
allest in 200
7
percent of 33 of 2004,
percentage from tax
urces. State hat shared
e tax PPh yers in the
PBB, and BPHTB.
natural re- de natural
al gas, gen- Since 2006,
DBH fore- epends on
ion shared he increas-
ared, DBH r from Rp
on in 2009. 2001-2008
n per year t per year.
funds bal- r is greater
icates that nding me-
eceived the
08
8
h m
u r
th o
R fu
e 2
d fr
C c
in v
n in
la o
s th
s in
S r
A
8
highest Natu mantan Prov
ural resource eceived the
he Province of the overal
Revenue sha unds propo
entire provin 2008 and 24
district or cit rom the tot
City would b cent in 2009.
n the distric vincial level.
Province nue sharing
nces. In 200 argest DBH
oil-producing second large
he province sharing is W
nce is a new Sulawesi Pr
eceived the Alor District
Figu
ural resource vince that is
e DBH, while lowest Natu
e of Yogyaka ll revenues n
aring natur ortion from t
nce in Indon 4.74 percent
ty, the prop tal revenue
be 11.13 perc . It seems th
t or City is s es that recei
are general 08, the prov
is DKI Jaka g, but it has
est is the Ea e that receiv
West Sulawes w province an
ovince. The
e smallest r t and is on
Source: Financ
ure 7. DBH a in bill
Ju
es DBH is in 38.93 percen
e the district ural resource
arta that is 0 natural reso
ral resources the total rev
nesia is 25.26 in 2009. W
portion reven the entire d
cent in 2008 hat the reven
smaller than ived the gre
lly oil-produ vince who r
arta. DKI Jak s the bigges
ast Kaliman ved the lowe
si Province. nd is a divisi
e district o
revenue sha nly 6 billion
e Ministry, Fina
allocations by lion rupiah
urnal Ekonom
n East Kali- nt of all nat-
t or city that es DBH is in
0.01 percent ources DBH.
s and taxes venue in the
6 percent in While at the
nue sharing district and
and 17 per- nue sharing
n in the pro- eatest reve-
ucing prov- eceived the
karta is not t PAD. The
ntan. While, est revenue
This prov- ion of South
or city that aring is the
n, while the
ance Note variou
y Provinces
mi Pembang
Kutai D sharing w
DAK absorbed
ance in t did not
Sidik an ous goal
the DAK portant
DAU for penditur
The DAK investme
tainmen pensates
priority fiscal de
tion are the coun
With 2002, D
which is reforesta
Finance station a
and mar There h
us editions: proc
the largest a
gunan Volum
District rece with 4,308 b
K is special d an average
the period o fully meet
nd Kadjatmi ls in the des
K is mainly needs that c
rmula and t res that relat
K is also use ent, and 3
t of a mini s for benefit
capital inves ecentralizatio
based only ntrys Refore
hin two yea DAK funds
s part of 40 ation funds
Note, 2009 allocated for
ritime affair has been en
cessed data
and the lowe
me 13, Nomor eived the l
illion. transfer to th
e 17 percent f 2001-2009.
all the obj iko, 2003. T
sign of the D intended to
could not be to assist with
ted to nation ed to finance
the DAK p mum stand
tcost spillo stments. In t
on policy, t y on revenu
station Prog ars of decent
allocated fo 0 percent o
s Ministry . In 2004, D
r clean wate rs and the
ncouraging
ers selected
r 1, Juni 2012: largest reve
he region w of the fund
DAK alloca ectives of D
here are num DAK such as
o help fund e estimated
h funding of nal priorities
physical cap promotes the
dards, and c overs related
the beginnin he DAK all
ue derived f gram.
ralization 2 or reforestat
of total reve y of Fina
AK Non ref er infrastruc
fisheries sec DAK cove
in 2008
: 1-17 enue
which bal-
ation DAK
mer- s: 1
im- in a
f ex- s, 2
pital e at-
com- d to
ng of loca-
from 2001-
tion, enue
ance, fore-
cture ctor.
rage
Implementation of Fiscal Decentralization Nursini 9
since 2005 in agriculture sectors, environment, family planning and forestry. To demonstrate
local commitment in the implementation of DAK, the required matching funds in the
budget, at least 10 percent of the amount re- ceived in DAK allocation. In line with the addi-
tion of fields that are funded through the DAK, DAK realization increases from year to year.
Similarly regions that receive DAK also increased due to expansion of the provincial
and district or city. East Java is the highest re- gion that received DAK allocation in 2008.
From Figure 3 to 7 shows the transfer of funds from central government to regional
governments provincial and districtcity. It can be concluded that the allocation of funds
transfers the fund balance to the regional government has absorbed most of the state
budget. DAU is the largest component of the balance funds. Fund balance is one source of
regional government revenue. The presence of the balance of funds as one source of regional
revenue affects the structure of regional govern- ment budgets. Thus, the structure of regional
government budget consists of regional reve- nues, expenditure and financing. The regional
revenue side consist of local own revenue PAD, fund balance and other local revenues.
One of the purposes of the policy of regional autonomy and fiscal decentralization is
the reduction of financial dependence by the regional governments to central government.
This means that regional governments are required to increase the potential revenue
source that comes from their own region. In this case the question arises how far regional
governments have reduced their dependency levels during the implementation of regional
autonomy and fiscal decentralization?
The Degree of Fiscal Decentralization in Indonesia
Act No. 34 of 2000 mentioned that there are 11 eleven local taxes granted to regional govern-
ments provincial and districtcity in deter- mining the tax base, tax rates and as well as
administrative and types of local taxes and user charge that may be levied by regional govern-
ments. However, the Act allows regional gov- ernments to add local tax sources and user
charges in accordance with predetermined cri- teria Simanjuntak and Mahi, 2003. The eleven
of the local taxes can be seen in Table 1.
With the presence of such Act, has the regional government PAD increased signifi-
cantly? Realization of the sources of regional revenue for all provinces and districtscities
can be seen in Figure 8. For three years 2007- 2009, fund balance position as the largest
source of regional revenue with an average of Rp191.45 trillion per year, the second largest
revenue is PAD with an average increase of
Table 1. Local Taxes Types Based on Law No.342004 in Indonesia
Revenue
Vehicle tax Vehicle transfer tax
Fuel tax Exploration tax of surface and
underground water DistrictCity
Hotels tax Restaurants taxes
Entertainment taxes Advertisement taxes
Streetlighting taxes Exploration tax of mines type c
Parking tax
Responsibility Disposition
revenue Base Rate Adm
Center Province Local
C,P P P 30 70
C,P P P 30 70
C,P P P 90 10
C,P P P 100 0
C,L L L 0 100
C,L L L 0 100
C,L L L 0 100
C,L L L 0 100
C,L L L 0 100
C,L L L 0 100
C,L L L 0 100
Source: Simanjuntak and Mahi,2003
1
4 a
y r
to a
s a
p th
r a
10
47.12 trillion average Rp16
This figu years, there
evenue each o Rp61.96 tr
age increase smaller than
ance reached periods. By
hat the con evenue com
all programs
So Source: Finance
Figure
n per year a 6.77 trillion
ure shows th is a trend i
h year, from rillion in 20
e only reac n the averag
d 78.68 perce considering
ntribution of mes from loca
and activiti
ource: Finance M
Fig
e Ministry, vario
e 8. Regiona City in In
a b
a b c
Ju
and others P Figure 8.
hat during th increase in o
Rp36.10 tril 09. Howeve
ched 31.52 ge increase i
ent during th g this fact o
f regional g al own reven
es is still rela
Ministry, Finance
gure 9. PAD M
ous editions pro
l Revenue So ndonesia, 20
c b
a b c
urnal Ekonom
PAD by an he last three
own source llion in 2007
er, the aver- percent, is
n fund bal- he 2007-2009
one can say government
nue to fund atively very
e Note, 2009
Map by Provi
ocessed data
ources by C 007-2009
a b c
mi Pembang
low. In o ernment
consider the shar
nues tha over the
contribu still goin
of regio tion will
Figu in 2009.
sia is onl
inces in 2009 omposition t
gunan Volum
other words t dependenc
red big enou re fund bala
at reached a
last three y uting of 19.74
ng on in the nal autonom
l not yet achi ure 9
shows Total PAD
ly recorded a
in Millions r the whole Pr
a a
b c
me 13, Nomor s, the level o
ce on centra ugh. This can
ance to tota an average o
years, while 4 percent. If
coming yea my and fisc
ieved optima the PAD ma
for all provi at Rp 42.5 tr
rupiah rovinces and
b b
a c
c
r 1, Juni 2012: of regional g
l governmen n be shown f
al regional r of 73.63 per
the PAD is o this conditio
rs, then the cal decentra
ally. ap by provi
inces in Ind rillion. Only
d District
c b
a
: 1-17 gov-
nt is from
reve- rcent
only on is
goal liza-
nces one-
four
Implem
provin Rp4 tr
contrib percen
Sulawe revenu
If of 2000
not giv revenu
district the cau
are stil for exa
nal gov plore p
there w level w
vely co harm
course, and 3
Law is rejected
cates th variety
revenu zation
mentation of
nces of 33 pr rillion, In 20
butor is DKI nt of total rev
esi, Rp64 m ue.
connected w 0 one can sa
ven importa ue at the re
tcity. Ther use: 1 most
ll taken ove ample, incom
vernment do potential sou
was some ca with regiona
ollecting tax local comm
, this case w Criteria of
s very strict d by the ce
hat local go y of policies
ue without b of increasin
Figure 10. Pr in
a b
f Fiscal Dece
rovinces tha 009, the larg
Jakarta, Rp1 venue and t
illion or 0.5 with the pres
y that the ta ance to the
egional leve re are three
t of the poten er by the cen
me tax and oes not work
urces of othe ases that occ
al governme xes from peo
munities an was not justifi
f local taxes so many PE
entral govern overnments
to encourag burdening th
ng revenue t
roportions P n percent
b c
entralization
at have PAD gest own rev
11.1 trillion the lowest is
8 percent of sence of Act
ax assignmen increase of
l provincia main reaso
ntial taxes so ntral govern
oil tax, 2 R k optimally
er taxes, alth curred at the
ent was agg ople who se
nd investor ied under th
s according ERDA which
nment. This
still need to ge increased
he public. Op hrough the
PAD Sources
a b
Nursini D over
venue 26.16
s West f total
No.34 nt has
f own al and
ons as ources
nment, Regio-
to ex- hough
e local gressi-
eem to rs. Of
he Act, to the
h was s indi-
o do a d local
ptimi- inten-
sif the
see so
to Am
tax PA
PA Ind
lar ro
cit ow
at
tio flu
am oth
ch pe
9.4 typ
pr tax
ing
to Total PAD
a
c
fication is sti Although
e total regio en and an
urces which the PAD a
mong the fou xes, user cha
AD, local ta AD the who
donesia, wh rgest. Taxes
le between ty. In genera
wn revenue the district o
During th on of local t
uctuated, but mount was e
her types harge only c
ercent, local e 44 percent fo
pes of own rospects and
xes without g other own
D Provinces
a b
b c
a
ill badly nee h PAD is a
onal revenu nalyzed typ
h provide th and has pro
ur sources o arge, public
axes is the ole province
hile the user and user ch
different pr al, local tax
source at th or city is the
he period 2 tax revenue
t the average encouraging
of own re contributed
enterprise is or other ow
revenue sou d still need to
forgetting t n revenue sou
and District
c
a c
ded. small contr
ue, but it ne pes of own
he largest co ospects in t
f increased P enterprises
largest cont e and distri
r charge is t harge have a
rovincial and revenue is t
he provincial user charge
2007-2009, th to total ow
e is 74.13 pe when comp
venue sour an average
s only 4.66 pe wn revenue.
urces that h o be increas
the efforts o urces.
tCity, 2007-2
b c
11
ribution to eeds to be
n revenue ontribution
the future. PAD local
and other tributor to
ictcity in the second
a different d district
the largest l level and
e. he propor-
wn revenue rcent. This
pared with rces. User
e of 11.78 ercent and
Therefore, have better
sed is local of improv-
2009
1
o fu
c is
R 2
tr in
p in
lo c
o b
ti r
fa
p ic
g o
s p
w tu
th d
r r
a
12
After rev of regional g
und transfer can be conclu
s recorded Rp140.6 trilli
2009 or incr rillion per y
ng the peri provide grea
n funding t ooking at th
can say that obstacle for r
be expected ive correlati
egional reve are.
The suc policies of ea
cy can be d gional reven
oriented to th so it can crea
poor people will be refle
ure. There a he structure
direct expend ect expendi
ectly related activities. Th
So
Figure 11
viewing and overnment r
r and other l uded that th
substantial ion in 2007
reased by an year, or grow
iod 2007-20 at meaning to
the provisio he magnitud
the fundin regional gov
to occur is ion between
enues and i ccess of a r
ach regional done throug
nues in pr he needs of s
ate jobs and e. Allocation
ected in the are two com
e of regional diture and d
iture is expe d to the fin
here are eigh
ource: Finance M
1. Trends in R 2007-2009