Bonn: German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE)
Price: 10 €
In order to stimulate revenue mobilisation and local autonomy, some governments decentralise property taxes to the municipal level. Indonesia did so in a gradual process between 2010 and 2014, transferring responsibility for the rural and urban land and building tax to its nearly 500 cities and districts. But has this so-called devolution led to strengthening the property tax as a source of public revenue? The present study explores whether decentralisation leads to a better use of the land and building taxation potential in Indonesia.
The study holds that initial evidence at an aggregate level points to an increase in property tax collection after decentralisation. A more detailed look at individual cases reveals, however, that local governments shy away from making full use of the powers given to them by the new decentralisation law. The study analyses the implementation of the property tax reform at the local level and derives lessons from the initial outcomes of the current process. It combines a macro-level view with in-depth case studies in seven Indonesian cities and districts. Further, it discusses options for broadening local property tax collection in the future by extending it to the plantations sector.