One of the arguments made by some Indonesian government officials in defence of continued central control over the property tax is that it has performed well under their authority and that its decentralisation would inevitably result in weaker operations and outcomes. The property tax has indeed grown remarkably well over the past 15 years. This growth, however, has been from a very low base, has been dominated by increased revenues from the mining sector and has been driven by a small number of sub-national governments. Recently, only around 40% of local sector property tax potential has been realised under central control, given the existing tax rate and base. Property valuations are the most problematic aspect of administration but tax coverage and collections are also sub-standard. While there may, in fact, be insufficient local government capacity to manage the property tax, even to current levels of performance, this problem could be solved by transferring the relevant central staff to local governments, as has been carried out in other newly decentralised sectors. But even before tax administration is devolved, local governments could at least be given some authority over the property tax rate, presently one of the lowest in the world.
|Journal||Public Administration and Development|
|Publication status||Published - 2003|