Rethinking Local Tax Authorities: Sectoral Constraints and Fiscal Inequality in Bali’s Decentralization Framework
Article Sidebar
-
Fiscal Policy, Decentralization, Local Tax Power, Subregional Economic Characteristic
Abstract
Research Originality – This study contributes to the existing literature by analyzing how local tax authorities, sectoral economic structures, and levels of fiscal autonomy at the subregional level are interrelated, an issue that remains underexplored as prior research has predominantly focused on revenue realization, tax effort, and macro-fiscal stabilization. It also illustrates structural contradictions in areas with an economy based on the tertiary sector of economic production, such as Bali, where dependence on the service sector does not directly translate into fiscal autonomy.
Research Objectives – The purpose of this study is to find out the effect of local tax authorities’ policy implementation on the tax revenue structure and its correlation with local tax revenue autonomy in eight regencies and one city in Bali Province. It also takes into account sectoral economic characteristics and their influence on local tax revenue capacity.
Research Methods – The study uses a descriptive and correlational quantitative approach to examine the relationship between the economic structure of different sectors and local tax revenue. The analysis uses data from eight regencies and one city in Bali Province.
Empirical Results – There is a robust correlation between the tertiary economic sector and local tax revenue, whereas the primary sector's contribution is negligible. The secondary sector's tax revenue is limited, which aligns with the Law on Financial Relations between the Central Government and Local Governments (UUHKPD). Fiscal disparities are extreme, with an index ranging from 15.48 to 85.60, and 55% of the regions are classified as fiscally dependent.
Implications – The study highlights the need for regional fiscal policy reforms through the intensification and extension of the tax base, including the optimization of the primary sector and the improvement of the synchronization of central and regional fiscal regulations.
Full text article
References
Adnyana, I. M. (2020). Penganggaran perusahaan. Lembaga Penerbitan Universitas Nasional.
Alavuotunki, K., Haapanen, M., & Pirttilä, J. (2019). The effects of the value-added tax on revenue and inequality. Journal of Development Studies, Taylor & Francis Journals, 55(4), 490–508. https://doi.org/10.1080/00220388.2017.1400015
Auerbach, A. J., & Gorodnichenko, Y. (2017). Fiscal stimulus and fiscal sustainability. NBER Working Paper No. 23789. National Bureau of Economic Research. https://doi.org/10.3386/w23789
Baskaran, T., Feld, L., & Schnellenbach. (2016). Fiscal federalism, decentralization, and economic growth- a meta-analysis. Econmic Inpuiry, 54(3), 1445–1463. https://doi.org/10.1111/ecin.12331
Dana, B. S. (2018). Penerimaan dan belanja pemerintah daerah di Indonesia: Analisis sigma konvergen dan beta konvergen. Simposium Nasional Keuangan Negara. https://api.semanticscholar.org/CorpusID:126715316
Dorgu, T., & Bulut, U. (2018). Is tourism an engine for economic recovery? Theory and empirical evidence. Tourism Management, 67, 425–434. https://doi.org/10.1016/j.tourman.2017.06.014
Gemmel, N., Gill, D., & Nguyen, L. (2018). Modelling public expenditure growth in New Zealand, 1972–2015. New Zealand Economic Papers, 53(3), 215–244. https://doi.org/10.1080/00779954.2018.1458330
Ginting, A. M., Hamzah, M. Z., & Sofilda, E. (2019). The impact of fiscal decentralization on economic growth in Indonesia. Economic Journal of Emerging Markets, 11(2), 152–160. https://doi.org/10.20885/ejem.vol11.iss2.art3
Günay, H., & Topal, M. (2021). Does quality of governance affect tax effort in Sub-Saharan Africa? JOEEP: Journal of Emerging Economies and Policy, 6(2), 414-434. https://izlik.org/JA23NX22KP
Handoko, R. (2019). Tax revenue and economic activity: Seasonality, cointegration and causality analysis. Kajian Ekonomi dan Keuangan, 3(1), 1–17. https://doi.org/10.31685/kek.v3i1.401
Hanif, I., Wallace, S., & Gago-De-Santos, P. (2020). Economic growth by means of fiscal decentralization: An empirical study for federal developing countries. Sage Open, 10(4), 1-12. https://doi.org/10.1177/2158244020968088
Karagöz, K. (2013). Determinants of tax revenue - Does sectorial composition matter? Journal of Finance, Accounting and Management, 4(2), 50–63. https://www.researchgate.net/publication/284756325_Determinants_of_tax_revenue_does_sectorial_composition_matter
Kartika, M. (2021). Reviewing local revenue capacity in Indonesia. Economics, Social, and Development Studies, 8(1), 1-20. https://doi.org/10.24252/ecc.v8i1.19186
Kim, J., & Dougherty, S. (Eds.). (2018). Fiscal decentralisation and inclusive growth. OECD Fiscal Federalism Studies. OECD Publishing & Korea Institute of Public Finance (KIPF). https://doi.org/10.1787/9789264302488-en
Lago, M. E., Lago-Peñas, S., & Martinez-Vazquez, J. (2024). On the effects of intergovernmental grants: A survey. International Tax and Public Finance, 31(3), 856–908. https://doi.org/10.1007/s10797-023-09816-7
Mapunda, M., Kira, A. R., & Ngomuo, S. (2023). Does service sector growth influence tax revenue in Tanzania? Cogent Business and Management, 10(3), 1-18. https://doi.org/10.1080/23311975.2023.2259615
Minh Ha, N., Tan Minh, P., & Binh, Q. M. Q. (2022). The determinants of tax revenue: A study of Southeast Asia. Cogent Economics and Finance, 10(1), 1-20. https://doi.org/10.1080/23322039.2022.2026660
Nicola, R. N., & Saleh, M. (2023). Pengaruh produk domestik regional bruto (PDRB), belanja modal dan jumlah penduduk terhadap penerimaan pajak daerah di Kabupaten Banjar. JIEP: Jurnal Ilmu Ekonomi dan Pembangunan, 6(2), 995–107. https://doi.org/10.20527/jiep.v6i2.11080
Poniatowicz, M., Konopka, P., & Piekutowska, A. (2024). Towards a comprehensive evaluation of decentralization: A multidimensional insight of OECD Countries. Technological and Economic Development of Economy, 30(6), 1652–1681. https://doi.org/10.3846/tede.2024.21518
Pramanda, A. A., Sukmadilaga, C., & Yudianto, I. (2023). Menakar local taxing power menggunakan analisis subnational tax effort: Studi pada kabupaten/kota di Provinsi Jawa Barat. Jurnal Akuntansi, 18(1), 20–36. https://doi.org/10.37058/jak.v18i1.6930
Prichard, Wi. (2016). Reassessing tax and development research: A new dataset, new findings, and lessons for research. World Development, 80, 48–60. https://doi.org/10.1016/j.worlddev.2015.11.017
Rahman, Y. A., Oktavilia, S., Fafurida, & Karsinah. (2020). Tax revenue convergence among provinces in Indonesia. Advances in Natural and Applied Sciences, 14(2), 198–204. https://link.gale.com/apps/doc/A644543693/AONE?u=anon~c617b5aa&sid=googleScholar&xid=278b7547
Ramei, V., & Zubiari, S. (2018). Government spending multipliers in good times and in bad: Evidence from US Historical Data. Journal of Political Economy, 126(2). https://doi.org/10.1086/696277
Ryandiansyah, N. R., & Azis, I. J. (2018). Structural change, productivity, and the shift to services: The case of Indonesia. Economics and Finance in Indonesia, 64(2), 97–110. https://lpem.org/repec/lpe/efijnl/201806.pdf
Sampurna, A. F. (2018). Menuju manual review desentralisasi fiskal. Makalah Disajikan dalam Rapat Kerja Pemeriksaan Pengelolaan dan Tanggung Jawab Keuangan Daerah (AKN V dan Akn VI) BPK.
Sanchez-Rivero, M., & Pulido-Fernández, J. I. (2020). Global estimation of the elasticity of “International Tourist Arrivals/Income from Tourism.” Sustainability (Switzerland), 12(20), 1–16. https://doi.org/10.3390/su12208707
Seriano, L. D., & Liop, E. (2019). Decentralization and the quality of public services-cross-country evidence from educational data. Sage Journal, 37(7), 1-21. https://doi.org/10.1177/2399654418824602
Setiawan, F., & Aritenang, A. F. (2019). The impact of fiscal decentralization on economic performance in Indonesia. IOP Conference Series: Earth and Environmental Science, 340, 1-8. https://doi.org/10.1088/1755-1315/340/1/012021
Sofilda, E., Hamzah, M. H., & Kusairi, S. (2023). Analysis of fiscal decentralization, human development, and regional economic growth in Indonesia. Cogent Economics & Finance, 11(1), 1-15. https://doi.org/10.1080/23322039.2023.2220520?urlappend=%3Futm_source%3Dresearchgate.net%26utm_medium%3Darticle
Sugiyono. (2022). Metodologi penelitian kuantitatif, kualitatif dan R&D. Alfabeta.
Tang, M. (2025). Industrialize with tax structure change: Agricultural tax abolition and local industrial growth in China. China Economic Review, 90, 1-25. https://doi.org/10.1016/j.chieco.2024.102339
Yasin, M. Z., Landiyanto, A., Retno, H., Arini, B., & Rizqina Maulida, S. (2021). Two decades of fiscal decentralization: Implications on the regional development in Indonesia. Retrieved from https://dx.doi.org/10.2139/ssrn.4039821
Authors
Copyright (c) 2026 Indonesian Treasury Review: Jurnal Perbendaharaan, Keuangan Negara dan Kebijakan Publik
This work is licensed under a Creative Commons Attribution 4.0 International License.
Copyright notice can be accessed here