Regional Fiscal Capacity Research Articles

Analisis Potensi Pendapatan dan Kemandirian Daerah di Kawasan Arek Jawa Timur

The study aims to determine the magnitude of the potential for regional income and independence arek region in East Java Province in 2017 – 2021, by calculating the Location Quotient analysis, the degree of fiscal decentralization, and the regional fiscal capacity index. The results of the LQ calculation show that Batu City has the highest LQ in other service sectors. Analysis of the highest degree of fiscal decentralization and regional fiscal capacity index is owned by Surabaya City. The research results recommend that local governments need to optimize their economic potential as a source of tax revenue, increase local own-source revenue (PAD) so that they’re not dependent on transfers from central government, and increase regional capabilities by expanding a new tax base to finance government spending.

A Comprehensive Economic Analysis of Tobacco Farming Potential in Grobogan Regency, Central Java

This study aims to investigate the planning for the Tobacco Products Industrial Area (KIHT) development in Grobogan Regency, Central Java, based on economic analysis. KIHT is an area where the activities of the tobacco products industry are concentrated, equipped with infrastructure, facilities, and supporting facilities for the tobacco products industry. The study was designed with a survey approach, in-depth interview, and focus group discussion (FGD) with 100 key informants to obtain facts from the existing phenomena and find information factually. The number of key informants is based on the number all of tobacco numbers in Grobogan regency. The study, therefore, analyzes tobacco competitiveness, labor absorption, product market, and macroeconomic analysis. To sharpen the analysis, the study was supported with a questionnaire instrument to see how far tobacco farmers were prepared in KIHT development. Empirically, the results showed that tobacco farming absorbed 150 HOK/ha per season, greater than corn farming which only absorbed 52 HOK per season per ha and rice farming which absorbed 87 HOK per season per ha. It had high competitiveness with the oligopsony market structure. In addition, the market for tobacco products was experiencing a significant upward trend, and it is in accordance with the Cobweb Theorem law that the behavior of farmers will try to increase the planting area when there is a previous price increase. From the potential of tobacco products, Grobogan Regency received an excise duty of IDR 14.87 billion or 2% of the total excise duty of Central Java Province. This revenue-sharing fund will increase the regional fiscal capacity.

Exploring the Nexus between Regional Fiscal Capacity and the Convergence of Inclusive Economic Development

Exploring the Nexus between Regional Fiscal Capacity and the Convergence of Inclusive Economic Development

The Comparison Of Leading Sector Analysis Of Medan City And Nias Regency (Case Study 2017-2021)

The specific skills discussed in the research are the leading sectors in the economic system. Medan City and Nias Regency are two areas within the jurisdiction of North Sumatra Province. The two regions have differences in geographical location, making them both have differences in the economy's structure. In terms of economic growth, the two regions showed differences where Medan City is superior in percentage growth. A significant difference between the two regions is the significant difference in the status of the Regional Fiscal Capacity Index. This study aims to identify the leading sectors owned by Medan City and Nias Regency in the 2017-2021 observation period. The method used is descriptive quantitative by using analytical tools in the form of LQ and DLQ analysis, Klasen Typology, Shift-Share Analysis, and Overlay Analysis. The results showed that Medan City does not have a leading sector at all and Nias Regency has one leading sector in the form of the mining and quarrying sector. This study provides recommendations for the Medan City Government and Nias Regency Government to re-evaluate economic policies, especially related to sectors experiencing a slowdown, progressive sectors, and leading sectors in their respective regions.

Determinants of Infrastructure Spending Efficiency in Indonesia: Data Envelopment Analysis (DEA) and Tobit Regression Approach

This study aims to measure the efficiency value of the Ministry of PUPR's infrastructure development in each province in the 2020-2022 period and examine the influence of the determinants of efficiency through fiscal capacity, population, and area. The data used in this study uses secondary data, namely expenditure realization data in the PUPR Ministry's financial reports, Minister of Finance Regulations regarding regional fiscal capacity, and data on population and area according to the Central Bureau of Statistics. This study uses two stages of analysis; the first is to measure technical efficiency with the DEA approach through the assumption of input-oriented VRS (Variable Return to Scale), and the second is to analyze the determinants using the Tobit regression model. The study results show that the average infrastructure development efficiency score decreased over 2020-2022. Other results find that fiscal capacity has an effect on increasing the efficiency of infrastructure development, and population size and area have an effect on reducing the efficiency of infrastructure development.

Performance Analysis of Regional Original Income in Maluku Province and its Optimization Strategy

Regional autonomy on the one hand has had a positive impact in the form of opening opportunities for regions to regulate and manage the interests of local communities according to their own initiatives. However, on the other hand, regional autonomy also gave birth to a number of serious consequences, including the still high dependence of local government finances on the central government because the regional fiscal capacity has not been able to finance the growing demand for development needs in the regions.
 High regional fiscal dependence also occurs in Maluku Province, where the contribution of Local Own Revenue (PAD) to the total regional revenue of Maluku Province in 2018 is only 15.2 percent. This figure even decreased compared to previous years which averaged around 18 percent. Meanwhile, the role of PAD in achieving Gross Regional Domestic Product (GDP) is also still relatively low, reflected in the elasticity of GRDP to PAD which is still inelastic at around 0.8.
 This implies that the optimization of Regional Original Income (PAD) as the main source of revenue in self-financing government activities, development and services to the community is still quite low. Of course, this condition can have an impact on fiscal stress and is homework for the Maluku Provincial Government to further empower regional revenue sources.

STRATEGI PENINGKATAN PENDAPATAN RETRIBUSI DAERAH DI KOTA KENDARI

One source of local revenue that has the potential to be developed to support regional fiscal capacity is revenue from regional levies. The purpose of this writing is to find out the strategy for increasing regional retribution revenue in Kendari City, Southeast Sulawesi Province. The results of the study found that the intensification strategy through improving the quality of public services and reforming the collection system, improving the quality of management staff, using technology, and increasing supervision, as well as the extensification strategy through updating rules, creating new regulations and establishing new sources of fees as well as increasing citizen awareness in Paying user fees is a strategy of the Kendari City government in an effort to increase local revenue.

The Effect of Regional Fiscal Capacity on Climates Change Action Budgeting Commitments

This journal aims to determine the effect of regional fiscal capacity on climate change action budgeting commitments. The research method used is a quantitative method with a statistical test approach to Structural Equation Modeling (SEM). The results of this study indicate that the local government's fiscal capacity of Gorontalo Regency has a significant positive direct influence on climate change action budgeting commitments.

The Impact of Regional Financial Capability during the COVID-19 Pandemic towards Regional Fiscal Capacity

Regional fiscal capacity is the region’s ability reflected in regional revenue, consisting of own-source revenue (PAD), fiscal balance transfers, and other legitimate regional revenues. This study aims at analysing the impact of regional financial capability during the Covid-19 Pandemic towards regional fiscal capacity. The research was conducted in local governments in Indonesia during 2020 using descriptive qualitative analysis. The results showed that generally the Covid-19 Pandemic affected the reduction on own-source revenue (PAD) in almost all provinces in Indonesia during the first semester of 2020. From 66 regencies/cities as the sample from this research, 49 regencies decreased in revenue and expenditure because of the Covid-19 Pandemic. The revenue reduction in each region was caused by regional taxes reduction of around 2,5 percent and 10,68 percent sequentially in the first semester of 2020, fiscal balance transfers around 8,42 percent, and general allocation grant (DAU) around 9,8 percent and 6,94 percent. Meanwhile, to solve the regional fiscal problems, the local governments implemented 2 types of policies: (1) the first policy is to implement a counter-cyclical policy through maintaining economic stability, decreasing revenues, and increasing local government expenditures; (2) the second policy is to implement a pro-cyclical policy through increasing revenues and decreasing expenditures. The present research also found that regencies/cities that implemented a counter-cyclical policy generally increased in expenditure components, such as grant expenditure around 316,51 percent and regional capital expenditure. Some local governments built infrastructure (assets and buildings) during the Covid-19 Pandemic. However, local governments decreased around -1% - 16% for the employee expenditures.

Analisis Kemampuan Keuangan Daerah dalam Mendukung Pembangunan Kota Palangka Raya

This study uses statistical analysis and trends to see the development of the Degree of Fiscal Decentralization, Ratio of Regional Original Income to Total Regional Revenue, Degree of Fiscal Autonomy and Regional Fiscal Capacity of Palangka Raya City during the period 2008-2017 showing positive developments. Meanwhile, for the degree of Fiscal Decentralization, the Ratio between Tax and Non-Tax Revenue Sharing, the Contribution of Regional Assistance to Total Regional Revenue and Fiscal Needs for the City of Palangka Raya for the period 2008-2017 showed negative results. This situation shows that the regional financial capacity of Palangka Raya City in supporting development independently tends to be lacking.

Cost Effective Institution Practices in Indonesia: Case Study of Badung Regency Government

This study tries to explore the practices of cost effective institutions (CEI) in the Badung district government through two approaches, namely the cost-reduction approach and the cost-control approach. This research is a descriptive research with qualitative method. The selection of research loci in Badung Regency was carried out through the Regional Fiscal Capacity Map (KFD) and the Regional Fiscal Independence Index (IKF) Map which showed very developed and good conditions so that they could serve as examples for other local governments in Indonesia. The data collection was carried out by in-depth interviews in two groups, namely the government group and the public group. The results of this study conclude that in principle the Badung Regency Government has implemented a Cost Reduction and Cost Control mechanism with a fairly good implementation strategy and method. However, not all components can be fulfilled according to the ideal concept of Cost Effective Institutions that has been mentioned in Hickel (1993). In general, at least three main stages of CEI implementation practices were found, starting from the planning stage, implementation stage, and monitoring and evaluation stage. There is not much difference between theory and practice, only the model created from the findings of this study reflects the detailed characteristics of budget management in the Badung Regency Government. This study recommends the application of CEI as an approach that is able to encourage the creation of local government functions with a spending control mechanism in order to achieve optimal performance.

Transformation of Regional Budgetary Independence and Security: Spatial Analysis

The issue of increasing budgetary independence and security is relevant for the majority of territorial systems, both at the regional and municipal levels. It was hypothesised that changes in the structure of regional public debt have a negative impact on their budgetary security. According to this hypothesis, an increase in the proportion of bank borrowing and corresponding decrease in the issue of debt securities by the constituent entities of the Russian Federation leads to a greater overall debt burden on the regional budget. In order to study transformation processes affecting budgetary independence and regional security. We developed a methodology to permit a separate assessment of these concepts. According to this approach, we propose to evaluate the budgetary independence of regional systems in terms of: (1) the balance of the budget (ratio of internal tax and non-tax revenues to budget expenditures); (2) financial dependence on transfers and subsidies from budgets at other levels; (3) budget security, taking into account gratuitous and non-gratuitous transfers. Thus, budget ary security can be assessed in accordance with the public debt dynamics, as well as the level of budgetary debt covered by the region’s own tax and non-tax revenues. The novelty of the presented methodological approach consists in its systematic use of Moran’s I for various spatial weight matrices combined with regression analysis methods based on panel data. Testing this methodology demonstrated the spatial heterogeneity of regional fiscal capacity, highlighting the financial dependence of most regions on federal and other gratuitous transfers. Autocorrelation analysis carried out according to Moran’s I using various spatial weight matrices confirmed the increasing tendency of the budgetary debt of Russian regions towards spatial heterogeneity. Future studies will focus on simulating the influence of various factors on regional budgetary security in order to predict the dynamics of its change.

It Is Possible Fiscal Capacity Effected by Covid-19 Pandemic?

The world economy, including Indonesia, in the first quarter of 2020 has not been too affected by Covid-19. However, in the second quarter of 2020, national economic growth began to decline. As a result of the contraction of the Indonesian economy, it has an impact on the decline in regional fiscal capacity. This study focuses on: 1) The effect of Economic Growth on fiscal capacity in 34 provinces in Indonesia before and during the Covid-19 pandemic?; 2). Development of sources of fiscal capacity in Indonesia; 3). Quadrant of Relationship between Economic Growth and Fiscal Capacity; 4). The government's policy direction is to encourage increased fiscal capacity during the Covid-19 pandemic. This research uses descriptive quantitative method using panel data regression model. The rate of economic growth does not significantly affect the amount of regional fiscal capacity in 34 provinces in Indonesia. The decline in fiscal capacity was largely influenced by a decrease in Regional Original Income (ROI). In 2021 the sources of fiscal capacity building have not run normally. The effect is that the regional fiscal capacity is still low for each province. Therefore, to restore the economy, the government uses various stimuli, namely fiscal, monetary, and sectoral.

North Aceh Regional Innovation Policy in the face of reduced Regional Fiscal Capacity after the end operational PT. Arun. LNG

Through Law no. 11 of 2006 concerning the Government of Aceh. Aceh has very broad powers, especially in the area of fiscal decentralization, which allows the Aceh government to have greater discretion in maximizing its fiscal needs. The phenomenon that occurred in North Aceh is very paradoxical with the fact that the North Aceh Government experienced a very large budget deficit after the end of PT. Arun. LNG as a contributor to oil and gas revenue sharing. This study aims to find out what innovation policies are carried out by the North Aceh Regency Government to overcome the budget deficit after the end of PT. Arun LNG. The results of the study show that various policies have been carried out by the North Aceh government but are still short-term in nature. So it can be concluded that the North Aceh Government does not have Social Accountability in implementing Aceh's Special Autonomy. In the Medium-Term Development Plan, a major policy that is substituted for income that will be lost after the end of the operations of PT. Arun.LNG so that the budget deficit can be overcome and the regional fiscal gap does not become negative.Through Law no. 11 of 2006 concerning the Government of Aceh. Aceh has very broad powers, especially in the area of fiscal decentralization, which allows the Aceh government to have greater discretion in maximizing its fiscal needs. The phenomenon that occurred in North Aceh is very paradoxical with the fact that the North Aceh Government experienced a very large budget deficit after the end of PT. Arun. LNG as a contributor to oil and gas revenue sharing. This study aims to find out what innovation policies are carried out by the North Aceh Regency Government to overcome the budget deficit after the end of PT. Arun LNG. The results of the study show that various policies have been carried out by the North Aceh government but are still short-term in nature. So it can be concluded that the North Aceh Government does not have Social Accountability in implementing Aceh's Special Autonomy. In the Medium-Term Development Plan, a major policy that is substituted for income that will be lost after the end of the operations of PT. Arun.LNG so that the budget deficit can be overcome and the regional fiscal gap does not become negative.

Poverty Reduction through Local Financial Performance: Case Study in East Nusa Tenggara Province, Indonesia

The high level of poverty in East Nusa Tenggara Province, Indonesia, requires effort to be alleviated. For instance, there is a need to enhance the financial management performance of the locals. Therefore this study analyzes the contribution of local financial performance to the poverty rate. It uses panel data regression analysis involving 22 regencies and municipalities from 2015 to 2018. The results of the study showed that the local financial independency ratio in various regencies and municipalities has fewer contributions to the poverty rate. Local governments need to increase regional fiscal capacity integrated with efforts to improve regional macroeconomic performance. Moreover, they should increase alignments toward poverty alleviation programs as well as the capacity of regional apparatus.

Poverty Reduction through Local Financial Performance: Case Study in East Nusa Tenggara Province, Indonesia

The high level of poverty in East Nusa Tenggara Province, Indonesia, requires effort to be alleviated. For instance, there is a need to enhance the financial management performance of the locals. Therefore this study analyzes the contribution of local financial performance to the poverty rate. It uses panel data regression analysis involving 22 regencies and municipalities from 2015 to 2018. The results of the study showed that the local financial independency ratio in various regencies and municipalities has fewer contributions to the poverty rate. Local governments need to increase regional fiscal capacity integrated with efforts to improve regional macroeconomic performance. Moreover, they should increase alignments toward poverty alleviation programs as well as the capacity of regional apparatus.

Improving Regional Fiscal Capacity in Central Java Province Indonesia

This study discusses the development of fiscal capacity in Central Java, Indonesia. The purpose of this study is to analyze internal and external factors that increase regional fiscal capacity, and formulate strategies by analyzing internal and external elements to obtain four alternative strategies namely 'strength - opportunity' strategy, 'strength - threat' strategy, 'weakness - opportunity' strategy and Strategy for 'weaknesses - threats'. This study uses secondary data to analyze indicators of regional fiscal capacity and primary data collected through focused discussions, to analyze strategies. The results of the analysis indicate that there are several main strategies to increase regional fiscal in Central Java Province, namely the program of intensification and extensification of regional taxes; improving the quality of human resources with special competencies in the field of taxation; synergy and internal coordination between regional government institutions; improvement of the supervision system for taxpayers; realizing clear and legal regional regulations, simplifying the mechanism for managing investment licenses in Central Java and optimizing regional revenues through modernizing the collection of taxes and levies by utilizing technology. Modernization of increasing regional fiscal capacity will encourage the achievement of equitable regional revenue, increase public participation, administrative efficiency, consistent law enforcement, and improve the level of public confidence in the implementation of good governance.

Does Fiscal Decentralization Increases Regional Income Inequality in Indonesia?

This paper examines the impact of fiscal decentralization on regional income inequality in Indonesia. This study employs dynamic panel data analysis–the two-step system generalized method of moments (GMM) on 2008-2017 regional level datasets. This study found that regional income inequality indeed increases during the implementation of fiscal decentralization and appears to be exceptionally high for rich provinces. Essentially, this study suggest that fiscal decentralization appears to increase regional income inequality in Indonesia. The results might be due to low regional fiscal capacity in Indonesia, which induces high dependency of local government that further restraints local competition in public goods provision. 
 
 Keywords: fiscal decentralization, regional income inequality, generalized method of moments (GMM).

Сравнительная оценка подходов к расчету налогового потенциала регионов

Three basic methods are employed to assess the fiscal capacity of territories for fiscal equalization: the representative tax system method, the historical data method, and the macroeconomic indicator method. Each of these methods has its own advantages and disadvantages, while the historical data method is considered the most accurate in terms of approximation of the values of fiscal capacity to actual budget revenues. The aim of the article is to compare the accuracy of assessing Russian regions’ fiscal capacities through various methods, as well as by combining them, and to propose measures to change the current methodology for fiscal capacity assessment. The calculations presented in this article for the Russian regions for 2018 show that, in fact, the representative tax system and historical data methods have a comparable degree of accuracy, and the macroeconomic indicator method is only slightly inferior to them. At the same time, while assessing the fiscal capacity in regard to individual taxes, both the method of historical data and the method of representative tax system may have an advantage in the accuracy of the assessment, the method of macroeconomic indicators being inferior to them (except for the case of corporate income tax). As the author’s calculations show, it is possible to improve the accuracy of assessing regional fiscal capacity through the following measures: (1) not taking into account data for the current financial year, that is, taking into account data for only two reporting years; (2) not adjusting income tax and personal income tax fiscal capacity to the rate of tax revenue growth; (3) using the method of macroeconomic indicators for mineral extraction tax and other tax fiscal capacity.

ANALISIS DATA PETA KAPASITAS FISKAL DAERAH

The study was conducted to process and analyze the Regional Financial Ability (KKD) map data. The design of this research uses descriptive qualitative through desk study with a deepening of various laws and regulations and the processing of secondary data at the Directorate General of Fiscal Balance, Ministry of Finance.The results of the study concluded that the factors that most influenced the Regional Fiscal Capacity Map (KFD) for the provinces were PAD and DBH while for districts / cities were PAD, DAU, and DBH. In general, regions that have a high proportion of PAD / DBH to income have a high KFD Index, while regions with a low KFD Index generally have a low PAD. For provincial governments that have a low KFD Index, most (> 50%) districts / cities in their regions have a low KFD Index, while for provinces that have a high KFD Index, it does not necessarily mean that most districts / cities in the region have a high KFD Index.