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Lessons From Previous Taxes’ Studies To Indonesian Local And Regional Governments After Fiscal Decentralization

Author

Listed:
  • KOdrat Wibowo

    (Department of Economics, Padjadjaran University)

Abstract

One consequence of Indonesian fiscal decentralization is that local governments will have to seek additional revenues coming from their own resources, especially local taxes. For the first year of the implementation of decentralization alone, they had authorized approximately 1000 new taxes and charges in order to increase revenues with hoping these taxes would help to boost their local economic growth. The effects of taxes on the economic growth have been an interesting topic for decades in all around the nation. However, empirical studies of the relationship between taxes and economic growth have produced inconsistent results. This paper attempts to study the effect of taxes on economic growth by conducting a quite massive literature review of the relationship between taxes and economic growth. Tax variables in the state level studies are shown to have ambiguous effects on the economic growth. On the other hand, tax variables in international level studies are generally shown to have a negative effect on economic growth. The policymakers in Indonesian local governments need to be careful in designing a new tax structures after fiscal decentralization. Imposing new taxes to pump up revenues with hoping that it would help boosting the economic growth or improving the economic performance should also consider the fact that taxes tend to have a negative effect on economic growth.

Suggested Citation

  • KOdrat Wibowo, 2004. "Lessons From Previous Taxes’ Studies To Indonesian Local And Regional Governments After Fiscal Decentralization," Working Papers in Economics and Development Studies (WoPEDS) 200402, Department of Economics, Padjadjaran University, revised Feb 2004.
    • Handle: RePEc:unp:wpaper:200402
    as

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    File URL: http://ceds.feb.unpad.ac.id/wopeds/200402.pdf
    File Function: First version, 2004
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    References listed on IDEAS

    as
    1. Yamarik, Steven, 2000. "Can tax policy help explain state-level macroeconomic growth?," Economics Letters, Elsevier, vol. 68(2), pages 211-215, August.
    2. Blane Lewis, 2003. "Tax And Charge Creation By Regional Governments Under Fiscal Decentralisation: Estimates And Explanations," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 39(2), pages 177-192.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Tax rate; fiscal policy;

    JEL classification:

    • H40 - Public Economics - - Publicly Provided Goods - - - General

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