TY  - BOOK
AU  - Chattha, Muhammad Khudadad
PY  - 2024
DA  - 2024//
TI  - Refining Indonesia's Intergovernmental Transfers Mechanism: Fiscal Capacity Estimation to Incentivize Subnational Tax Effort
T3  - Equitable Growth, Finance and Institutions Insight
PB  - The World Bank
CY  - Washington, D.C
KW  - Fiscal Capacity Estimation
KW  - Fiscal Policy
KW  - Intergovernmental Transfers
KW  - Macroeconomics and Economic Growth
KW  - Subnational Tax Effort
KW  - Tax Reform
KW  - Taxation and Subsidies
AB  - This paper discusses the application of the conceptual framework for potential revenue estimation using Indonesia's existing macroeconomic indicators. The authors find that Gross Regional Domestic Product (GRDP), population, and urbanization rate are good predictors for most tax sources. These three indicators also predicted the total district's OSRs well, providing an empirical foundation for an aggregated macro-based model to estimate all OSRs using the abovementioned variables. The rest of the paper is structured as follows: section 1 provides a description of Indonesia's system of intergovernmental transfers and subnational taxation. It shows subnational fiscal reliance on transfers rather than OSRs. Section 2 makes the case for reforming the DAU formula and explains recent efforts by the Government of Indonesia on that front. Section 3 discusses the limited existing empirical literature on estimating potential revenues for transfers formula. Section 4 explains and applies our conceptual framework for potential revenue estimation. It also provides the empirical justification to use an aggregated approach to estimation rather than estimating each individual tax base. Section 5 applies the aggregated approach to estimating potential revenues. Section 6 discusses the equity implications and makes the case for using district fixed effects. Finally, section 7 provides a conclusion of this paper
UR  - http://elibrary.worldbank.org/doi/book/10.1596/40975
UR  - https://doi.org/10.1596/40975
DO  - 10.1596/40975
LA  - English
N1  - Muhammad Khudadad Chattha
ID  - 1881726169
ER  -