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Study on Optimalization of Own-Source Revenue in Regencies and Municipals in Central Java Province

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Study on Optimalization of Own-Source Revenue in Regencies and Municipals in Central Java Province JIEP-Vol. 16, No 1, Maret 2016 ISSN (P) 1412-2200 E-ISSN 2548-1451 Study on Optimalization of Own-Source Revenue in Regencies and Municipals in Central Java Province Jalu Aji Prakoso 1, Suci Rahmawati Prima2, M. Chrisna Satriagasa 3, M. Syahli IMNS 4 1Magister of Economic Development, Faculty of Economics and Business, Gadjah Mada University 2Magister of Economic Development, FEB UGM; Faculty of Economics, Andalas University 3Faculty of Geography, Gadjah Mada University 4Magister of Economics Development, Faculty of Economics and Business, Gadjah Mada University Email: [email protected] Abstract Optimizing the management of potential areas would provide additional revenue for the region. This research aims to assess whether the government in the counties and cities in Central Java province has been optimally manage their potentials so as to provide benefits increased local revenues derived from the wealth management area. Through the relationship between the variables of the original income (PAD) and the Gross Domestic Product (GRDP) in the counties and cities in Central Java is expected to be known whether each area has been optimal in obtaining local revenue. The data used is data revenues and GRDP in counties and cities in the province of Central Java during 2011-2013 from the Central Statistics Agency (BPS), the Supreme Audit Agency (BPK), Report of Realized APBD, and RPJMD Central Java. Methods of data analysis in this research is to use a simple linear regression analysis (OLS Model) and design analysis group. The analysis showed the existence of ties between the GRDP and the PAD. The magnitude of the relationship analyzed by simple linear regression, where the results indicate a positive trend. The analysis showed that the GRDP value of the coefficient b> b PAD either at the district, town and overall. These results indicate that there has been no attempt by the government to manage PAD so as to generate the GRDP increase. The government can manage the outcome of PAD to be used in a way that increases the GRDP obtained. As for the test results to determine differences in optimizing the management of local revenue between districts and cities showed that the district can generate GRDP is greater with smaller PAD. It shows that the effort made by the district is more efficient than the effort undertaken by the municipality. Spatial analysis shows a comparison of the GRDP against the PAD in each county and city in Central Java province is divided into four clusters. Each cluster has a distinct regional characteristics seen from economic activity. The results of the socio-economic analysis of the economy in Central Java province when seen from the conditions of employment, which absorbs the most amount of power keraja is in the agricultural sector, which amounted to 31%, followed by the trade sector 22% and industry 19%. Keyword: Decentralization, PAD, GRDP JEL Classification: H72, O18 16 JIEP-Vol. 16, No 1, Maret 2016 ISSN (P) 1412-2200 E-ISSN 2548-1451 1. INTRODUCTION vernment areas expected to be able to Implementation of Law No. 22 increase local revenue. of 1999 on decentralization of autho- Java island is an island with a rity from the central government to the high population density and has in- local government supports indepen- frastructure more rapidly than other dent era unfolded for local governance islands in Indonesia, but the data in Indonesia. Delegation of authority shows that the PAD are still many from the center applies both to the areas with a low level of revenue delegation of authority and delegation collection. Especially in Central Java of financial management. The area has province which has 35 districts and responsibility for financial manage- cities have three leading sectors of ment to achieve the welfare of society. agriculture, mining and processing Form of delegated authority of the fi- industry which will be the economic nancial sector is regulated in Law No. potential of the area that needs to be 33 of 2004, where there is a financial managed and used efficiently and balance between the central govern- effectively. Central Java province also ment and local governments. Financial has the infrastructure and wealth of balance between the center and the natural resources than many other area provides flexibility for regions in provinces in Java coupled with its managing the potential of available strategic location allows high mobility resources. of the population that should have The freedom to manage its PAD is high. finances to make one of the sources to The increase in revenue is increase local revenue. Regional inco- expected to push the budget allocation me derived from the management area larger so that local governments can is a potential revenue (PAD), which improve the quality of public services. may include the collection of taxes, But if polling PAD is optimal to do, levies, and other wealth management how the management of PAD in each are separated. Optimizing the mana- region, it is necessary to study the gement of potential areas would pro- optimization of revenue collection in vide additional revenue for the region. counties and cities in Central Java Current conditions, management of province. local revenue are performed in each region in Indonesia has not fully 2. THEORETICAL FRAME optimized. Evidently, from the value WORK AND HYPOTHESIS of central government transfers to Financial management local Planning Budget Expenditure Financial management is the (APBN) in 2016 amounted to overall activities that include planning, Rp.770,2 trillion or 36.8% of the total implementation, administration, repor- state budget. The amount of funds ting, accountability and financial con- from the center to the area indicate trol area (PP 58 of 2005). Financial that the region still rely on funding management adheres to the principles from the central support of the increa- of transparency, accountability and sed local revenues for local funding. value for many. Transparency is a Thus, to reduce dependence on local form of transparency in the process of government financing by the central planning, preparation and execution of government takes effort to increase local budgets. In this principle, mem- revenue sourced from the region. bers of the public have the same rights Through optimizing the management and access to know the budget process of existing resources in the local go- 17 JIEP-Vol. 16, No 1, Maret 2016 ISSN (P) 1412-2200 E-ISSN 2548-1451 for the aspirations and common inte- implementation of government and re- rests, especially the fulfillment of life. gional development. As for the principle of accoun- Revenue is earned income are- tability associated with public respon- as levied by local regulations in accor- sibility which means that the public dance with the legislation. In Article 6 budgeting process means that the bud- stated that the source of revenue geting process, from planning and pre- consists of local taxes, levies, wealth paration to implementation must be management outcomes separated absolutely reportable and accountable areas, and others PAD legitimate. (Act to Parliament and the public. People No. 33 of 2004). Explanation of the not only have the right to know the PAD components are: budget but also the right to demand 1) Tax accountability for the im-plementation 2) According to Law No.28 of of the plan or the budget. While the 2009 on Local Taxes and Levies principle of applying the principles of Local Taxes, hereinafter called value for money, efficiency and effec- Tax, is a mandatory contribution tiveness in the budgeting process. to a region that is owed by pri- Economics deals with the sel- vate persons or entities that are ection and use of resources in a certain enforceable under the Act, by quantity and quality at the lowest po- not getting the rewards directly ssible cost. Efficiency means that the and used to the area for the use of public funds (public money) purposes of the overall pros- should produce the maximum output perity of the people (empowering). Furthermore, the effec- 3) Levies tiveness means that the use of the bud- 4) Levies, hereinafter referred levi- get must achieve the objectives of pu- es, levies Regions as payment blic interest. for services or certain special Own-Source Revenue permits provided and / or gra- According to Law No. 25 of nted by the regional government 1999 which was then revised by Law for the benefit of private persons No. 33 of 2004 on Financial Balance or entities. between Central and Local Govern- 5) Results of Regional Wealth Ma- ment stated that the PAD, PAD is nagement The Separated hereinafter referred to as the income 6) Section profit enterprises is part collected Regional Regional Regula- of the profit or net income from tion in accordance with the legislation. regional companies or other en- PAD aims to give authority to local tities which are public enter- governments to fund the implemen- prises. While the regional com- tation of regional autonomy in accor- panies is a company whose ca- dance with the potential of the region pital is partly or wholly a wealth as the embodiment of decentralization. of separated areas. Regional Income is one source 7) Other legal PAD must always and continuously spur 8) Revenue other than those men- growth, because PAD is an important tioned above remain valid. This indicator to meet the level of indepen- acceptance includes receipt of dence of government in the financial the rent of the local agencies, re- sector. The higher the role of PAD to ntal of buildings and land have the budget, the more successful efforts local, current accounts, the sale of local governments to finance the of second-hand goods belonging 18 JIEP-Vol. 16, No 1, Maret 2016 ISSN (P) 1412-2200 E-ISSN 2548-1451 to the region and other income economic resources, shifts, and eco- authorized by law.
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