Fiscal Decentralization: Revenue Sharing Fund of Income Tax And Local Government Performance In Tax Collection
Muhammad Heru Akhmadi (a)- Imam Sumardjoko (b)

(a) Polytechnic State Finance of STAN
(b) Central and Regional Financial Analyst, Ministry of Finance

Abstract

The implementation of fiscal decentralization in Indonesia is realized by the transfer of funds from the central government to local governments. One type of transfer fund that provided is Revenue Sharing Fund of Income Tax (RSFIT) which is calculated at 20% of Income Tax receipts and its distributed based on the composition of the resident population in province or local government. To increase tax revenue, especially income tax, this study aims to review a formulations alternative for calculating RSFIT using local government performance in tax collection. This study uses quantitative methods with causality test analysis using data on realization of income tax and RSFIT originating from all provinces in Indonesia. The result shows that local government performance in tax collection has a significant influence on the amount of RSFIT allocation with a p-value of 0.000. The difference between tax collection and tax payment can define as local government performance in tax revenue. This variable can propose as part of the formulation for calculating the RSFIT. The results of the causality test give a regression coefficient of -1.16. This shows that the higher of the difference between tax collection and payment will give an impact on reducing the allocation of RSFIT. On the other hand, the lower the difference between tax collection and payment cause the higher the allocation of RSFIT. This study can prove that the performance of local governments in tax collection will affect towards the allocation of RSFIT that provided by the central government.

Keywords: Tax, Fiscal Policy, Local Government

Topic: Economics