Own Source Revenue (%)

The share of local government revenue that comes from local sources (%), 2010

While it is the case that almost all subnational governments get most of their revenue from the Central Government (see budget-status indicator: fiscal transfers) there is growing interest in contribution of other sources of revenue as a means of financing the service delivery programs provided by local governments.

One such source is revenues generated from within the local area itself. These so-called “own-source revenues” are gained by various means and include: local area business taxes, activity related permits and licenses (e.g., street vendor licenses, drivers licenses, gun permits), fees for public services, and from fines for breaking various rules. Also included are revenues from government owned enterprises, such as electricity and water companies for their services. Another local source of revenue, yet to be fully exploited in many areas, is from land and property taxes. The legal basis for the collection from land and property taxes by Subnational governments is an area in which there has been recent legislative reform and as such promises to be a more significant source of revenue into the future.

the map
the map

How significant is own source revenue for local governments?

In 2010, among all Kabupaten and Kota, the revenue obtained from local sources averaged 5.9% of total revenues. In other words, the proportion was relatively small for most areas. However, some areas had close to a quarter of their revenues coming from local sources. The following table shows that the average share of revenue among the 10 Kabupaten with the highest percentages (24%) was close to 50 times greater than the average percentage for the 10 Kabupaten with the lowest percentages (0.5%).

Share of Revenue from Own Source Revenue

Subnational Government averages¸ 2010

All areas 10 areas with lowest per capita revenue 10 areas with highest per capita revenue
Local Governments
Kabupaten

5,0

0.5

24,1

Kota

9,7

2,2

22,7

Total

5,9

0,5

29,8

 

What about your area of interest?

Point to the subnational government of interest to you on the following map to see how what proportion of the revenues came from local sources in 2010 and see how it compares with the proportions in other areas. You can also make comparative assessments by looking at the data in the table below the map. Does your area have a high or low level of own source revenue compared to the national average?

Frequently asked questions

Where do local government revenues come from?

The money each subnational government gets to spend in any given year comes from various sources. By far the largest share of revenue comes from the Central Government (actually provided as a series of transfer payments by the Ministry of Finance (MoF). However, local governments also raise some money themselves (this source is called Own Source Revenue –see related indicator map) – and they sometimes get money from other sources too (such as, Foreign aid).

Fiscal transfers from the Central Government (see the map) are provided through a number of separate mechanisms. When grouped together several of these, namely: DAU (Dana Alokasi Umum _General Allocation Fund , DBH (Dana Bagi Hasal – Revenue Sharing Fund) and the DAK (Dana Alokasi Khusus) are collectively known as Dana Primbangan. Dana Primbangan underpins the fiscal transfer system, however, there are other types of transfer payments to regions and these have been proliferating in number more recent years: DPPID (Dana Penguatan Infrastruktur dan Prasarana Daerah -Funds for accelerating the improvement of regional infrastructure) and the DPID (Dana Percepatan Infrastrucktur Pendidikan – Funds for accelerating the improvement of educational infrastructure) are but two examples. For more information see …… (give link to an authoritative source which describes these transfer)

Seknas Fitra’s Views

We agree that local taxes, fees and fines provide an important means for Subnational governments to raise revenue and we support the expansion of locally sourced revenues especially by progressively-geared mechanisms (for example, land taxes where the rich pay progressively more than the poor).

As seen from, the maps the share of total revenue derived from “own source revenue” is very small in many jurisdictions. Those with very low levels would to do well to look at those governments able to raise more substantial amounts to see how they might improve their performance. We also recommend that the Central and provisional governments actively encourage growth in local revenue collections for those areas that have to date not progressed very far.

A further supporting argument in favour of increasing the share of money coming from local sources is that local taxpayers will have a greater interest in knowing what becomes of their taxes and they will be more likely to hold the government accountable for its spending activities.

Notwithstanding the above we believe that a much greater share of central government funds should be distributed to the Subnational governments than is currently the case. See Money should follow function

Data: Sources and notes

The data for each area used for this indicator comes from two sources. The total revenue data for each area is sourced from the Ministry of Finance budget information website (see http://www.djpk.depkeu.go.id/datadjpk/131/). These data can be accessed by reference to the webpage “Data Series”, and to the link “Dana Perimbangan”, Realised Budget 2010, and then Sheet 1 , Permentdagri 13. The population data was sourced from Indonesia’s 2010 population census (see http://sp2010.bps.go.id/.)

Missing data: there is 1 Kabupaten (namely: Kab. Nduga in Papua) for which budget data was not available.

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