The Impact of regional tax on economic growth in Java and Bali Islands (After desentralization)

HIDAYAT, Yuli, Zafrul Quadir Siddique

2010 | Tesis | S2 Magister Ekonomika Pembangunan

This study examines the impact of regional (district/municipal) tax on economic growth in Java and Bali islands after fiscal decentralization. Different districts/municipals show different rate of growths of as well as they have different tax rates. Growth theories have some predictions related to the impact of fiscal policy on economic growth. This study finds that marginal tax rate has a positive impact on economic growth. The small rate of marginal tax rate in Indonesia is possibly the reason behind this result. This study also finds that the impact of regional tax on economic growth for higher levels of marginal tax rates is different from that for lower levels. These results support the central government’s new policy on regional tax to extend regional tax base and to restrict regional government from creating new taxes.

Kata Kunci : Fiscal decentralization,Regional tax,Marginal tax rate,Economic growth