The Reflection of Local Government Revenues Optimality: A Study of District/Municipality in Jawa Barat Province

Abstract

Local Government Revenue (PAD) is still a minor source of district/municipality budget in Indonesia. Therefore local government are striving to increase it significantly. Those initiatives of PAD collection effort requires a balance with its potential, to avoid detrimental effect on the economy and community welfare. This research aims to obtain statistical benchmark of optimal level of PAD collection that consider the economic condition. We used regression model for all types of PAD, with data from 27 districts/municiplatity in West Java throughout the period of 2017 to 2019. The result shows that all four sources of PAD are significantly influenced by economic activities in different level. Local Tax is mostly influenced by economic activities. Its collection level are already optimum, indicated by collection ratio higher than 1, while the PAD from Local Government Owned Companies (BUMD) is the lowest ratio (0.813). Refer to the model, there are 16 of districts/municipalites of West Java Province are relatively low optimality in Local Tax colletion.