Assessing Regional Finance Independence in Indonesian Local Governments

Abstract

This study aims to identify the effects of local tax, tax revenue sharing, special allocation fund, and capital expenditure on the regional finance independence in Indonesia’s local governments. This study uses all districts/cities within the Central Java as a sample. The sample identification uses the purposive sampling method. Secondary data used in this study originates from the report of examination of the local government financial report and the summary of examination published per semester by the national audit board of the Republic of Indonesia. A total of 161 samples were retrieved, resulting in a total of 175 samples. The hypothesis testing was done using the multiple linear regression analysis method. The results of this research show that local tax, tax revenue sharing revenue, has a significant relationship on the regional finance independence in Indonesia’s local governments. While, allocational fund and capital expenditure does not have a relationship on the regional finance independence in Indonesia’s local governments.