Revenue loss from legal timber in Indonesia

The link between forest revenue administration and under performance of revenues from legal timber has received little attention in the literature. This article analyzes revenues from the timber royalty and reforestation fund fee, two important forest non-tax revenues in Indonesia whose tropical forest has been under threat of extensive deforestation particularly from commercial timber logging. It shows that revenue realization does not reflect potential with two key findings: first, timber royalty revenues represent only 52% of their potential, and second, revenues from reforestation fund fee suggest a counter-intuitive pattern – revenue realization is 34% above its potential. We provide plausible explanations from the perspective related to features of revenue collection. We further consider policy relevance in terms of forest revenue administration.