Page 9 - Working Paper (Fiscal Decentralization and Sub-national Taxes: Specific Case of Indonesia)
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DDTC Working Paper 1015

                                      Table 5 - Revenue Sharing based on Law 33 of 2004 (in percentage)
                    Revenue-shared Sourced Central Gov  Prov  Originating LGs  Other LGs in the same Prov  All LGs
                    Personal Income Tax           80       8             12                        -          -
                    Property Tax                  9 a   16.2           64.8                        -        10 b
                    Land & Building Transfer fee   -      16             64                        -         20
                    Forestry: land-rent           20      16             64                        -          -
                    Forestry: resource rent       20      16             32                      32           -
                    Forestry: reforestation       60       -            40 c                       -          -
                    Mining: land-rent             20      16             64                        -          -
                    Mining: Royalty               20      16             32                      32           -
                    Fishery                       20       -              -                        -         80
                                                           3              6                       6
                    Oil                          84.5
                                                         0.1 d          0.2 d                   0.2 d
                                                           6             12                      12
                    Gas                          69.5
                                                         0.1 d          0.2 d                   0.2 d
                    Geothermal                    20      16             32                      32
                    Notes:  a ) 9 percent of the revenue collected from property tax is defined as administration costs and distributed equally to all local government;  b ) 10 percent of the revenue collected
                    from property tax is allocated to all local governments based on the actual property tax revenue collection at the current year. 6.5 percent is distributed to all governments, and 3.5
                    percent is given as incentive to all local governments, which have revenues exceed the target of collection from the previous year. Currently, Central Government has relinquished all
                    property tax receipt for household to local governments;  c ) Revenue Sharing from reforestation is an ear-marked grant to rehabilitate forests in originating local governments;  d ) 0.5
                    percent of the revenue sharing from oil and gas is allocated to Provinces and vertically below local governments as additional fund for education (ear-marked grant).

                      As  mentioned  above,  revenue sharing  is  part   From Figure 5 on the next page, at macro level,
                   of the intergovernmental  transfer that  currently   Indonesia has a property tax to GDP ratio of around
                   implements. It is also a tool to address the problems   0.57 percent, which is one of the lowest among G20
                   of  vertical  fiscal  imbalances  between  central  and   countries as compared to G20 and BRICS averages
                   local governments. As in many developing countries,   of 1.21 percent and 1.90 percent respectively. The
                   major taxes are still remains at the central level, i.e.   number is  also not different to when comparing
                   Personal Income Tax  (PIT), Value  added  tax,  and   property tax revenue as % of total taxes revenue
                   most of property tax. Almost all money obtained   where  the  figure  for  BRICS  on  average  is  4.85
                   from property tax  collection  is allocated to local   percent and 7.60  percent for G20  on average.
                   governments  through  revenue  sharing.  Looking   India,  Turkey  and  Mexico  are  below  Indonesia
                   on the decomposition  of tax  revenue for  2014   with the figure of 0.48 percent, 0.27 percent, and
                   National  Budget,  revenue  collected  from  value   0.25 percent, respectively. Indonesia’s Property
                   added and income tax is substantially larger than   Tax  Base  comprises  mainly  recurrent  immovable
                   the other  taxes. For  example,  revenue combined   property tax.
                   from property tax,  excise  tax, international  trade
                                                                       Property  is  assessed  in  two  ways:  first  the
                   tax, and other tax is still lower to revenue coming
                                                                    land is valued, then any development that  is
                   from value-added tax.
                                                                    present on that land is valued. Property taxes are
                    Figure 4 - Decomposition of Tax Revenue in Indonesia  therefore calculated on both the land’s worth and
                                                                    any buildings that might occupy it. Property tax in
                   100%                                             Indonesia is thus defined as Land and Building Tax
                                                                    or  Pajak Bumi dan Bangunan.  Land  and  Building
                                                                    Tax  is  paid annually and is  administered  by the
                                                                    local  offices  of  the  Directorate  General  of  Taxes
                                                                    rates  vary  by region,  but  are generally between
                    40%                                             0.1 percent to 0.2 percent of the property’s value.
                                                                    Tax  re-assessments  take place  every three years,
                    20%                                             except in fast-growing areas where re-assessment
                                                                    takes place every year.
                         2001  2002  2003  2004  2005  2006  2007  2008  2009  2010  2011  2012  2013  2014  Figure 6 shows that  property tax  revenue in
                                                                    Indonesia mainly comes from PBB P3 (plantation,
                     Income Tax             Excise Tax              forestry,  mining,  and  non-mining  –  5,1,  2,  83
                     Value-added Tax        International Trade Tax  percent,  respectively).    Meanwhile,  property  tax
                                                                    of  urban and rural  is  only 9  percent of  the total
                     Property Tax           Other Tax               property tax  revenue or around 0.4 percent  of
                    Source: APBN 2014                               total tax revenue (or even less than 0.06 percent
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