Fiscal Role Research Articles

Legal-criminal aspects and characteristics of customs offences. Danger and their impact

In essence, evasion of customs payments is an illicit action of evading payment of amounts due to the state upon import or export of goods, collected by the customs body in accordance with the legislation. Under these conditions, it can be appreciated that the criminalization of the acts, united under the name of evasion of customs payments, had as its main cause the collection of these amounts. Since the beginning, customs payments have oscillated between having an economic or a fiscal role. In normal times, customs payments on imported or exported goods have always had a perfectionist role for the national economy. It is precisely in such circumstances, when fiscalism becomes excessive, fraud develops rapidly. The first reaction of the state is to tighten sanctions and increase the requirement of control, but practice demonstrates that fraud does not disappear or even diminish. It turns out that the means of combating it must be sought not only in the Criminal Code, but also elsewhere.

EMPIRICAL ASPECTS OF THE INFLUENCE OF THE COOPERATION OF FISCAL INSTITUTIONS ON PROPERTY TAX ADMINISTRATION

The purpose of this research is to develop scientific and pragmatic approaches to optimize the interaction of fiscal institutions in the process of administering property taxes to local budgets in Ukraine, considering contemporary realities and international experience.Results and Conclusions. The article addresses current issues concerning the interaction between government and local authorities in enhancing property tax administration procedures. It substantiates the theoretical determinants of property taxes and highlights their fiscal role within the tax revenue architecture of local budgets in Ukraine and the European Union. An organizational-methodological framework is improved to ensure the administration mechanism of property taxes in Ukraine across key dominants. Using an empirical approach and comparative analysis, the study reveals a positive trend in the share of property tax elements within the structure of local budget revenues in Ukraine. This trend is attributed to fiscal decentralization and cooperative efforts of fiscal institutions in achieving planned property tax revenue targets. First identified the synergistic fiscal effect of further active collaboration among tax authorities, local governments, and taxpayers in the context of forming and updating property registers in Ukraine for taxation purposes based on a value-based approach.Theoretical and methodical approaches to forecasting property tax revenues to local budgets of Ukraine have been further developed, taking into account fiscal policy trends under martial law and using the «forecasting» module of the SPSS statistics package. This approach made it possible to identify the limited fiscal impact of the real estate tax (excluding land), which does not align with global practices and indicates the incomplete fiscal and regulatory function of this tax in Ukraine.Based on the research results, measures are proposed to optimize property tax administration procedures in Ukraine, grounded in principles of cooperation, transparency, compliance, digitalization, and the use of fiscal registers (cadasters).

РОЛЬ РЕГИОНАЛЬНЫХ НАЛОГОВ В СИСТЕМЕ ДОХОДОВ БЮДЖЕТА СУБЪЕКТА РФ

The scientific work examines the essence and significance of regional taxes in the tax system of the Russian Federation. The fiscal role of regional taxes in the revenue system of the budget of the subject of the Russian Federation is determined by analyzing their revenues to the revenue side of the regional budget of the Republic of North Ossetia-Alania. The problems in the field of the research topic are identified and ways to solve them are proposed.

ПРОБЛЕМЫ ЭКОЛОГИЧЕСКОГО НАЛОГООБЛОЖЕНИЯ В РОССИЙСКОЙ ФЕДЕРАЦИИ

В настоящее время развитие системы экологического налогообложения является важной задачей в рамках проводимой государствами экономической политики. Увеличение в мире количества вредных производств приводит к ухудшению качества жизни, а также к истощению запасов природных ресурсов. Экологические налоги и сборы становятся основными инструментами природоохранной деятельности, важным источником доходов бюджета. В основу экологических налогов заложена идея денежной компенсации обществу потерь, которые возникли в результате хозяйственной деятельности плательщика. Экологические налоги также можно рассматривать как источник дохода, который можно реинвестировать в устойчивые проекты. Однако их успех часто зависит от политической поддержки и общественного признания. В Российской Федерации принят ряд законодательных актов, которые отражают государственную политику в области экологии. Несмотря на это, экологическое налогообложение в РФ нельзя назвать важнейшим инструментом реализации политики государства в области охраны окружающей среды и рационального природопользования. В структуре доходов консолидированного бюджета субъектов РФ доля экологических налогов составляет менее 1 %, что говорит о незначительной фискальной роли этих налогов.Автором рассмотрен ряд актуальных проблем реализации экологического налогообложения. Решение этих проблем позволит в полной мере использовать этот налоговый инструмент в рамках реализуемой в РФ экологической политики. Currently, the development of the environmental taxation system is an important task within the framework of the economic policy pursued by the state. The increase in the number of harmful industries in the world leads to a deterioration in the quality of life, as well as to the depletion of natural resources. Environmental taxes and fees are becoming the main tools of environmental protection activities, an important source of budget revenue. The basis of environmental taxes is the idea of monetary compensation to society for losses that arose as a result of the payer's economic activities. Environmental taxes can also be considered as a source of income that can be reinvested in sustainable projects. However, their success often depends on political support and public recognition. The Russian Federation has adopted a number of legislative acts that reflect the state policy in the field of ecology. Despite this, environmental taxation in the Russian Federation cannot be called the most important tool for implementing the state policy in the field of environmental protection and rational nature management. The share of environmental taxes in the structure of consolidated budget revenues of the subjects of the Russian Federation is less than 1%, which indicates the insignificant fiscal role of these taxes. The author considers a number of topical problems of realization of environmental taxation. The solution of these problems will allow using this tax instrument to the full extent within the framework of the environmental policy realized in the Russian Federation.

Illegal production, storage, transportation, and sale of excisable goods: Their environmental impact and criminal liability

The purpose of this study was to identify promising ways to improve the criminal legal framework for criminal liability for illegal production, storage, sale, or transportation of excisable goods with a purpose of their sale. To fulfil this purpose, various scientific methods were employed, namely: system- functional, logical-dogmatic, modelling, classification, formal-logical, formal- legal, comparative legal analysis. The study provided a detailed overview of excise taxation and control measures taken by the tax authorities in relation to excisable goods, including alcohol, tobacco, and other products. Examples from the existing law enforcement practice were provided, which demonstrate violation of the economic interests of the state under martial law and negative impact on the environment. The study emphasised the significant fiscal role of excise taxes in generating state budget revenues and regulating markets and analysed their significance in the context of environmental pollution. At the same time, the study criticised the lack of legal clarity and effectiveness of criminal penalties for illegal actions related to excisable goods under the current Criminal Code of Ukraine. It was emphasised that the current legislation does not contain a definition or interpretation of the category of “turnover of excisable goods”, as well as the relevant rules governing these legal relations. The study argued the expediency of removing the phrase “ethyl alcohol, alcohol distillates, alcoholic beverages, beer, tobacco products, tobacco, industrial tobacco substitutes, fuel, etc.” from Part 1 and Part 2 of Article 204 of the Criminal Code of Ukraine and consolidating the definition of the subject matter of criminal offences relating to crimes involving excisable goods. The study also proposed to amend Part 1 and Part 2 of Article 204 of the Criminal Code of Ukraine by introducing the concepts of large and especially large amounts for excisable goods. The practical significance of this study lies in the fact that its findings can be used by legislators to improve criminal law provisions, by law enforcement agencies to strengthen the fight against illicit trafficking in excisable goods, and by academics for further research in the field of criminal law

ФІСКАЛЬНА РОЛЬ НЕПРЯМОГО ОПОДАТКУВАННЯ У ФОРМУВАННІ ДОХОДІВ БЮДЖЕТУ ДЕРЖАВИ

The article examines the fiscal role of indirect taxes in the formation of state budget revenues. The peculiarities of indirect taxation in Ukraine, types of indirect taxes according to the current legislation are disclosed. Inflows to the state budget of indirect taxes were analyzed in terms of their absolute values, shares, and in relation to GDP. It was found that indirect taxes in the structure of the tax system of Ukraine are the main source, demonstrating high fiscal efficiency. The results of the analysis of the receipts of indirect taxes to the budget of Ukraine indicate that the key budget-forming tax is the value added tax, the second largest revenue is the excise tax, and customs duties occupy the third position in terms of revenue to the state budget. Therefore, indirect taxes in the structure of the tax system of Ukraine are the main source, demonstrating high fiscal efficiency, the reduction of their share in the structure of budget revenues in recent years occurred due to a full-scale invasion. In today’s conditions, tax reform should take place within the framework of a defined strategy, which will allow for a more reasonable modeling of the formation and forecasting of tax revenues to the budget, taking into account both indirect and direct taxes. It is important to emphasize the importance of consumption taxes as a key instrument of state influence on economic development, carrying out regulation by which the state contributes to the creation of competitive conditions in the domestic and foreign markets. This, in turn, contributes to the stimulation of business activity and the formation of added value, which is the basis of taxation of most types of taxes.

Implementation of the principles of financial management of territorial communities in the conditions of the russian-Ukrainian war.

The full-scale russian invasion has created unprecedented threats to local self- government bodies in Ukraine. This necessitates a reevaluation of traditional approaches to managing local finances. In war conditions, the financial stability of territorial communities becomes crucial. It is essential for meeting the basic needs of the population, maintaining local infrastructure, and ensuring the independence of local self-government bodies. The study results showed that during the russian-Ukrainian war, managing the finances of territorial communities requires both a prompt response to the consequences of military actions and strategic financial planning. Achieving these goals is possible by adaptation of the principles of financial management to war conditions, taking into account changes in sources, priorities, and volumes of funds. The analysis of the practice of implementing principles of financial management of territorial communities showed that ensuring the principle of capacity requires a comprehensive approach through income diversification, including increasing the fiscal role of local taxes and fees and attracting credit resources. It has been established that the principle of efficiency is achieved by optimizing budget expenditures to support defense capability. This is possible only if local self-government bodies properly exercise their powers. It has been substantiated that the principle of transparency in financial management at the local level, despite the limitations of martial law, should be ensured through public control mechanisms involving citizen participation. Additionally, the study results indicate that implementing a feedback system is crucial for ensuring the accountability of local self-government bodies and the quality of their financial decisions.

Influence of personal income tax on budget income formation of Ukraine

The paper defines the characteristics of population income taxation as the main component of tax revenues of the budget. The impact and fiscal significance of the personal income tax in the structure of tax revenues of the budgets of Ukraine is substantiated. When writing the paper, the method of comparison, synthesis, analysis, tabular and graphical presentation of research results was used, analyzing the dynamics of personal income tax receipts for 2018-2022. The necessity of today's realities regarding the creation of conditions in the tax system for the development of the country's economy and the formation of a stable budget is stated at the current stage. Taxes are an important part of the economic system and affect the formation of the revenue part of the state budget. During the analysis, the impact of the personal income tax on tax revenues to the state budget was revealed. It is outlined that usually indirect taxes prevail in the formation of the revenue part of the state's financial plan, because evasion of their payment is almost impossible. And in modern conditions, when Ukraine needs to restore territories, enterprises, it is the tax system that needs to create conditions for the development of the country's economy and the formation of a stable budget. Changes to the Tax Code and the loss of economic potential in some territories due to the closure or complete destruction of enterprises, the reduction of working personnel led to a decrease in tax revenues. In recent years, the contribution of personal income tax to the state budget has been - 21%; to regional budgets – 15%; to the budgets of territorial communities - 64%, which gives territorial communities the opportunity to increase their own financial resources. In order to achieve this goal, it is necessary to carry out a comprehensive reform of the tax system aimed at increasing the fiscal role of direct taxes by reducing the tax burden on business and the population, increasing the efficiency of tax collection, reducing the level of corruption and supporting small and medium-sized enterprises. And the proposed results of the research will help territorial communities to form their own incomes at the expense of income tax on the incomes of individuals and to perform the functions assigned to them.

Financial autonomy of local self-government in Croatia

The paper examines the notion and determinants of financial autonomy of local self-government in Croatia. The right to local and regional self-government as well as the competencies of local government units have been granted by the Constitution. Accordingly, the local government units are entitled to their own revenue, which they freely dispose of in performing their activities. However, financial autonomy is not clearly stated or defined, either at the constitutional level or at the statutory level. The primary source of local units’ revenues are taxes, followed by aid, ‘own source’, and earmarked revenues. The special emphasis of the paper is on ‘local’ taxes and the role of local government units in the formal aspects of financial autonomy, i.e. designing the local taxes’ notions and features. The paper also contains research on other local government units’ revenues, their legislative basis and normative design, and their role in local financial autonomy. Following the setting of the normative framework, the paper goes on to investigate the substantive aspect of fiscal autonomy, i.e. the fiscal role of local government taxes and other local revenue. The conclusions of the paper sum up the findings of the research and provide recommendations with the aim of making the system more sustainable in designing and achieving the financial autonomy of local government units in Croatia.

Методика проведения ревизионных процедур документации на движимое и недвижимое имущество в казенных учреждениях

The article has developed a methodology for checking documentation for movable and immovable property in state institutions, through a step-by-step study of accounting and accounting documents reflecting reliable information about the financial and economic activities of state institutions, which allows to exert a fiscal role on the reporting indicators of regulatory authorities.
 Keywords: movable and immovable property, reliability of budget accounting data, audit procedure, financial and economic activity, documentation, sequence of methodological procedures

INDIVIDUAL INCOME TAX IN UKRAINE: NATIONAL AND REGIONAL DIMENSION

The country’s tax system plays an important role in the formation of budget revenues at all levels and is the basis of the financial and credit mechanism of state regulation of the economy. Personal income tax is one of the most effective sources of income for Ukrainian budgets. However, the indicators of income from its payment have regional differences. The purpose of the study is to determine the fiscal role of personal income tax in Ukraine at the national and regional levels. Analysis methods were used to study the absolute and relative indicators of income from the personal income tax in the structure of the consolidated and local budgets of Ukraine; rating evaluation – for grouping regions of Ukraine according to relative indicators of tax payment; theoretical generalization – to form conclusions. The essence of the personal income tax has been revealed. The dynamics of its shares in the GDP of Ukraine, tax revenues to the Consolidated Budget of Ukraine are analyzed. A rating matrix of the grouping of regions of Ukraine according to the levels of tax shares in total revenues and tax revenues of the consolidated budgets of the regions was built. It was revealed that during 2019–2021, the share of personal income tax in the structure of tax revenues and revenues of the Consolidated Budget of Ukraine amounted to more than 20%; in the structure of tax revenues of local budgets – more than 60%. It was determined that in 2021, Mykolaiv, Vinnytsia, and Kirovohrad regions had clearly defined positions in terms of the levels of tax shares in the total revenues and tax receipts of the Consolidated budgets of the regions of Ukraine, all other regions fell into the zones of imbalances. Recommendations on improving the mechanisms of taxation of citizens’ incomes in Ukraine have been formulated.

Фискальная роль особых пошлин на импортные товары

The article considers the measures of customs regulation of foreign trade activities used in the world practice. Due to the liberalization of world trade, most countries reduce the use of customs tariff regulation measures, compensating them with the introduction of special duties on imported goods. The purpose of the study is to analyze the international practice of applying those special duties. Analysis of the application of special duties to and against the EAEU countries was carried out, and the implementation of the fiscal function of special duties was examined in particular. The hypothesis of the study is the assumption that special duties play an insignificant fiscal role in the state budget revenues. Analysis of the practice of applying special duties was conducted on the basis of data from the World Trade Organization and the Treasury bodies of the Russian Federation. In the course of the study, the economic and logical methods of comparison, detailing, as well as the balance method were actively used. It was found that anti-dumping duties, which account for 2/3 of all special duties, are most often used to regulate the import of foreign goods. Russia applies 25 protective measures to goods imported from other countries, and 93 protective measures are applied to Russian goods. Special duties are currently insignificant in revenues of the federal budget of Russia; in 2021 their ratio with the receipt of import customs duties amounted to 1.5%. At the same time, there is a steady growth in the receipt of special duties: over the past 10 years, it has increased 13-fold. To increase the fiscal role of special duties, it is advisable to change the order of their distribution among the EAEU countries, so that the entire amount of special duties on imported goods is credited to the budget of the country that initiated their introduction.

ПОДАТОК НА МАЙНО ЯК ДЖЕРЕЛО ФОРМУВАННЯ ДОХОДІВ МІСЦЕВИХ БЮДЖЕТІВ

The article defines the role of property tax in the formation of revenues of local budgets under martial law. The share of property taxes in GDP in Ukraine and in leading foreign countries is analyzed. The factors affecting the receipt of property taxes to local budgets are outlined. The fiscal role of the property tax in tax revenues and local budget revenues over the past 5 years has been revealed. The dynamics of the structural components of the property tax in the period from 2018 to 2022 were analyzed, namely the property tax other than the land plot, the land fee and the transport tax as sources of revenue generation for local budgets. The consequences of changes made to the Tax Code of Ukraine during the period of martial law regarding property taxes in Ukraine are highlighted. Problematic aspects and shortcomings in the field of revenue generation of local budgets due to property tax in terms of its structural components were identified and directions for their elimination were proposed. The directions for eliminating the identified problems are substantiated, including the following: development of a mechanism for the population to restore the car fleet in order to increase the tax base with transport tax in the future; increasing the interest of OTGs with a higher level of their own incomes in increasing revenues from real estate tax payments; timely and complete consideration of information and its entry into the State Register of Property; taking into account the territorial location of real estate for taxation purposes; granting the right to local authorities to take into account the level of income and marital status for the purposes of collecting real estate tax; not only expensive cars, but also other mass-demand vehicles should be considered tax objects; additionally use the volume of carbon dioxide emissions, etc., as the tax base for transport tax. It has been established that in order to eliminate the identified problems and deficiencies in the functioning of property taxation and increase its fiscal role in the revenues of local budgets in the war and post-war periods, it is necessary to apply a comprehensive approach to solving a number of institutional, organizational, legislative and regulatory, material and technical, personnel, process, financial, strategic and other issues.

МИТНІ ПЛАТЕЖІ ЯК ФІСКАЛЬНИЙ ІНСТРУМЕНТ ДЕРЖАВИ: ТЕНДЕНЦІЇ ТА ВИКЛИКИ ПОТОЧНОГО ПЕРІОДУ

The governments of many countries are facing the urgent task of forming a system of sustainable sources of budget revenues to finance various needs of the state in present conditions of uncertainty in economic, social, political processes. The article examines the role of revenues collected by customs authorities in the tax revenues of budgets of various groups of countries according to the classification of the World Customs Organization and their relationship with the level of economic development of such countries. The conducted research confirmed the important role of customs payments in the formation of the revenue base of the state budget of Ukraine (appr. 40% of total revenues). The most important fiscal role among customs payments is related to VAT on imported goods, while customs duty and excise tax on imported excise goods perform mainly a regulatory function, since their fiscal role is not significant. The positive and negative consequences of the use of customs payments as indirect taxes on different subjects of economic systems (governments, business and population) are studied. The negative economic results of the active use of indirect taxation include an increase in general prices level and an increase in consumer inflation. The high dependence of budget tax revenues on customs payments is a feature of countries with a low economic development level. It is necessary to create conditions for attracting investments, restoration of industrial and social infrastructure, reconstruction of housing, and production facilities in order to ensure the reliable basis for budget revenues col- lection. This kind of policy can contribute to the recovery of the economy, increasing businesses and population incomes, form- ing financial reserves, and will also create an economic base for a gradual increase in the role of direct taxes in budget revenues. Prevention of violations of custom legislation in foreign economic transactions can increase the revenues to the state budget without increasing the tax burden.

Collective management of copyright and related rights - fiscal implications

Creative activities are a constant in all the periods and changes that humanity has gone through, they enriched life, improved living conditions and contributed to the progress made in different areas of activity. In today’s highly digitized context, social networks, YouTube, Spotify and Netflix are representative means by which intellectual creations reach the public. In this equation, it is legally required to answer the question how do creators, authors and holders of related rights receive appropriate compensation for the use and exploitation of their works? Collective management organizations provide an answer, they provide a way through which copyright and related rights may be exercised. As a consequence of their contribution to the exploitation of copyright and related rights, collective management organizations also play a fiscal role. Some aspects require clarifications, such as identification of taxable persons, direct and indirect tax applied to the achieved income, as well as non-patrimonial tax obligations.

АНАЛИЗ ФИСКАЛЬНОЙ РОЛИ АКЦИЗОВ НА АЛКОГОЛЬНУЮ И ТАБАЧНУЮ ПРОДУКЦИЮ

This scientific research is devoted to the consideration of one of the key payments of the current tax system - excise payments. One of the revenue-generating items of the indirect tax under consideration is alcoholic and tobacco products. The supporting factors are the analysis of the fiscal role of excise duties on alcoholic beverages for 2020-2022. The profitability of the tax under consideration is ensured, among other things, by effective control and supervisory activities carried out by the Federal Customs Service of the Russian Federation and the Federal Tax Service of the Russian Federation, the administration of which is also analyzed in the scientific publication.

Фіскально-регулююча роль рентної плати в Україні

Resource rent taxation is an instrument of state regulation designed to stimulate natural resource users to minimize the loss of natural resources during their extraction and involvement in economic circulation, to ensure their rational use. Together with the performance of the regulatory function, resource rent taxation should be a significant source of income for the state budget. The purpose of the article is to highlight the current problems of resource rent taxation in Ukraine from the standpoint of its fiscal and regulatory role, to formulate proposals of an applied nature regarding the improvement of taxation of natural resources in the conditions of the intensification of European integration and martial law. The following general scientific and special methods were used in the research process: logical analysis, synthesis, expert evaluation, description, comparison, theoretical generalization and abstract-logical. The current state of distribution of resource rent taxation to state and local budgets is highlighted. It is also revealed that the State Budget of Ukraine accumulates the main part of resource rent taxation. The fiscal role of the resource rent taxation in the revenues of the Consolidated Budget of Ukraine in general and in terms of individual payments, in particular, is analyzed. It has been proven that the resource rent taxation remains one of the few mandatory payments that increase revenues and ensure the fulfillment of planned indicators. The main changes in the mechanism of accrual and payment of resource rent taxation in Ukraine are highlighted. It was established that resource rent taxation does not ensure rational use of natural resources. It was concluded that the reform of resource rent taxation should be based on the differentiation of rates depending on the objects of taxation, taking into account objective assessments of the productivity of sources of natural resources. At the same time, it is necessary to focus on ensuring optimal profitability indicators of economic entities that use natural resources, especially in strategically important areas, such as gas or oil production.

Certain aspects of taxation at the local level

Introduction. The article considers some aspects of taxation at the local level. The legal regulation of local taxes in Ukraine is determined. The purpose of the article is to clarify certain aspects of taxation at the local level. Summary of the main results of the study. The author focuses on financial decentralization, which should result in greater autonomy of local governments in the collection of taxes and fees. It is determined that local taxes are mandatory payments, the amount of which in accordance with the legislation of Ukraine is set by the local government in the relevant territorial-administrative unit and credited to its local budget. The legal bases of local taxation in foreign countries are described. In general, the local taxation of different countries differs significantly depending on various factors, in particular, the general standard of living, socio-economic policy, the level of legal culture of citizens, the properties of the tax system, minimize possible forms of tax evasion. Powers of local self-government authorities to establish local taxes and fees in foreign countries. The most significant shortcomings of local taxation in Ukraine are emphasized, among which: insignificant fiscal role of local taxes and fees, and, consequently, low specific share in local budget revenues, in gross domestic product; a small list of local taxes and fees compared to other countries; lack of absolute independent rights of local governments to introduce their own taxes and fees on their territory; lack of interest of local authorities in attracting additional funds from local taxes and fees; lack of interdependence between the level of public services in a given area with the tax capacity of the population, etc. The focus is on the latest changes in local tax legislation and the conditions for administering certain local taxes. Conclusions. It is concluded that local taxes and fees in Ukraine play an insignificant role in the formation of local government finances compared to the revenues of local budgets of foreign countries. Proposals for improving the local taxation system in the context of financial decentralization have been developed.

Central bank digital currency, tax evasion, and inflation tax

Abstract Can introducing a central bank digital currency (CBDC) improve social welfare? We construct a dual currency model to study whether CBDC with a record‐keeping technology can reduce tax evasion incentives in cash transactions and further achieve better allocations than a cash‐only economy with respect to fiscal arithmetic. We show that when there is inefficiency associated with tax evasion in cash transactions, introducing CBDC with strictly positive interest can remove the inefficiency and thus improve welfare by discouraging tax evasion and rewarding tax payments. This beneficial effect of the CBDC depends on the central bank's fiscal role.

The legacy of the reformasi: the role of local government spending on industrial development in a decentralized Indonesia

Starting in 2001 the Government of Indonesia employed the Regional Autonomy Law, providing larger fiscal role to the province and district governments. However, our understanding of its impacts on development in Indonesia is still limited. This paper seeks to find the relationship between increasing local governments’ capital expenditure and industrial development with focus in the non-oil and gas sector. Capital spending is thought to have moderation effect on investment, the main channel for industrialization, that should contribute to industrial growth. Our System GMM results suggest that there are positive and significant correlations between capital spending and industrial growth, presenting evidence of local governments’ role. However, we fail to find significant moderation effect between local capital spending and industrial investment towards the sector’s growth. This poses problem for industrialization at the local level. Decentralization progress in Indonesia has been institutionally anchored by the central government, particularly with the introduction of concurrent affairs in 2004 that allowed Jakarta to take a major developmental role in districts and provinces at the cost of lesser local governments’ role. Our study proposes a new institutional model that promote better central–local collaboration.