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Tax And Charge Creation By Regional Governments Under Fiscal Decentralisation: Estimates And Explanations

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  • Blane Lewis

Abstract

Under fiscal decentralisation, regional governments have been given the authority to create new taxes and charges. Many observers have criticised the regions for being too aggressive in establishing new revenue instruments, and the central government for allowing too many of them to stand. Regional governments authorised nearly 1,000 new taxes and charges in the run-up to and through fiscal year 2001, many of them focused on primary sector goods and factors. The analysis here suggests that only around 40% of all newly authorised subnational taxes and charges were submitted to the centre for review as required by law; the remainder were presumably implemented without central evaluation and therefore illegally. Regional governments argue that they create new taxes and charges out of fiscal need, but this paper finds no evidence to support the claim that lack of fiscal capacity is a driving force in the creation of new revenue instruments.

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  • Blane Lewis, 2003. "Tax And Charge Creation By Regional Governments Under Fiscal Decentralisation: Estimates And Explanations," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 39(2), pages 177-192.
    • Handle: RePEc:taf:bindes:v:39:y:2003:i:2:p:177-192
    DOI: 10.1080/00074910302016
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    Cited by:

    1. Lewis, Blane D., 2022. "The impact of democratic elections on taxation: Quasi-experimental evidence from subnational Indonesia," Economics Letters, Elsevier, vol. 211(C).
    2. Neil McCulloch & Edmund Malesky, 2011. "Does better local governance improve district growth performance in Indonesia?," Working Paper Series 1711, Department of Economics, University of Sussex Business School.
    3. Green, Keith, 2005. "Decentralization and good governance: The case of Indonesia," MPRA Paper 18097, University Library of Munich, Germany.
    4. Kelly Bird & Hal Hill & Sandy Cuthbertson, 2008. "Making Trade Policy in a New Democracy after a Deep Crisis: Indonesia," The World Economy, Wiley Blackwell, vol. 31(7), pages 947-968, July.
    5. James Alm, 2019. "Can Indonesia Reform Its Tax System? Problems And Options," Working Papers 1906, Tulane University, Department of Economics.
    6. United Cities and Local Governments, 2011. "Local Government Finance," Books, Edward Elgar Publishing, number 14696.
    7. Paul Pelzl & Steven Poelhekke, 2023. "Democratization, leader education and growth: firm-level evidence from Indonesia," Journal of Economic Growth, Springer, vol. 28(4), pages 571-600, December.
    8. KOdrat Wibowo, 2004. "Lessons From Previous Taxes’ Studies To Indonesian Local And Regional Governments After Fiscal Decentralization," Working Papers in Economics and Development Studies (WoPEDS) 200402, Department of Economics, Padjadjaran University, revised Feb 2004.
    9. Blane D. Lewis, 2005. "Indonesian Local Government Spending, Taxing and Saving: An Explanation of Pre‐ and Post‐decentralization Fiscal Outcomes," Asian Economic Journal, East Asian Economic Association, vol. 19(3), pages 291-317, September.
    10. Blane Lewis, 2006. "Local government taxation: An analysis of administrative cost inefficiency," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 42(2), pages 213-233.
    11. Paul Smoke, 2014. "Why theory and practice are different: The gap between principles and reality in subnational revenue systems," Chapters, in: Richard M. Bird & Jorge Martinez-Vazquez (ed.), Taxation and Development: The Weakest Link?, chapter 9, pages 287-325, Edward Elgar Publishing.

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