Indonesia Local Government Tax Analysis

Client: United States Agency for International Development (USAID) and the Indonesia Ministry of Finance
Faculty: Paul Smoke and John Gershman
Team: Treena Wu
Year: 2003

As part of the United States Agency for International Development technical assistance to the Indonesia Ministry of Finance, the project studied new taxes and charges adopted by local governments under the country’s evolving decentralization process. This study was part of a broader attempt to understand local government revenue-raising capacity to support local service delivery, which became more important after the fall of the centralized Suharto government. Specifically, this study sought to categorize more than 1,300 types of taxes throughout the archipelago. Data sets received from three different secondary sources were translated from Bahasa Indonesia to English and then cleaned for duplication. Remaining data points were defined according to sector and tax type. Analysis of the new set of taxes is intended to give the Ministry of Finance a better understanding of how local governments are using expanded revenue-raising powers and whether adjustments or further reforms are required.