The Effect of Local Own Source Revenue to Local Budget
Nur Afni Yunita and Muhammad Yusra
Lecturer in The Faculty of Economics and Business,
Universitas Malikussaleh, Aceh, Indonesia
Abstract. This Research goal to to know how influence of Local Own Source
Revenue to Local Budget at Province in Indonesia. Source of data at this research
is Report on Local Government Finances which in obtaining from Local
Government Budget which in the form of data about Local Government Budget
at Province in Indonesia start from 2013 to 2017 on Local Government Finances
with a period of perception during 5 year. Data analysis method used method
analysis simple linear regression. Result of this research indicate that Local Own
Source Revenue have an effect to Local Budget at Province in Indonesia.
Keywords: The local budget · Local own source revenue
1 Introduction
Regional revenue to obtain Local Own Source Revenue can be seen from the condition
of local taxes, regional levies and other valid local original revenues. One of the Local
Revenue that is increasingly being improved is through local tax revenue. That is
because taxes are the largest source of regional revenue in the collection of Regional
Original Revenues. Gradually the level of independence of a region will continue to be
pursued even higher through an increase in regional income obtained. The income is
expected to support an increase in regional spending that is also getting bigger.
Local Own Source Revenue whose components are revenue derived from regional
taxes, regional levies, the results of the management of separated regional assets and
other legal Local Own Source Revenue. A large increase in Local Own Source Revenue
is expected to encourage greater accountability, improve regional funding, and also
reduce the source of funding that comes from central government transfers that directly
increase regional independence.
Regional financial potential that is not the same cause a financial gap that can lead
to development disparities between regions. To reduce inequality and to support the
implementation of regional autonomy through the provision of sources of funding, the
issuance of UU No. 25 tahun 1999 [1]
was most recently amended by UU No. 33 Tahun
2004 [2] concerning Financial Balance between the Central Government and regional
governments.
Yunita, N. and Yusra, M.
The Effect of Local Own Source Revenue to Local Budget.
DOI: 10.5220/0010523700002900
In Proceedings of the 20th Malaysia Indonesia International Conference on Economics, Management and Accounting (MIICEMA 2019), pages 593-597
ISBN: 978-989-758-582-1; ISSN: 2655-9064
Copyright
c
2022 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
593
2 Literatur Review
2.1 Local Own Source Revenue
Halim (2001) [3] defines Local Own Source Revenue as revenue obtained by the region
from sources within its own region that are levied based on Regional Regulations and
in accordance with applicable regulations. According to UU No. 34 Tahun 2000 [4] the
Local Own Source Revenue is all regional revenue that comes from the original
economic resources of the region. Regional Revenue according to UU no. 33 Tahun
2004 [2] Article 1 is the right of a Regional Government which is recognized as adding
value to net assets in the period of the year concerned. In accordance with UU No.33
Tahun 2004 [2] concerning Financial Balance between the Central Government and
regions article 6 is as follows: 1) Local Own Source Revenue from: a. Local tax b.
Regional Retribution c. The results of the management of separated regional assets. d.
Other valid Local Original Revenue. 2) Other legal Local Own Source Revenue,
including: a. results of the sale of regional assets which are not separated. b. current
account service c. interest income d. profit difference between the exchange rate of the
rupiah against foreign currencies, and e. commission, deductions or other forms as a
result of the sale and / or procurement of goods and / or services by the Region.
2.2 Local Budget
Local Budget according to Peraturan Pemerintah No. 58 Tahun 2005[5], are all
expenditures from general cash accounts that reduce the equity of current funds, which
are regional obligations within one fiscal year that will not be repaid by the region.
Mardiasmo (2002) [6] defines local budget as all regional expenditures in a certain
fiscal year period that is a burden on the region. As an organization or household, the
government does a lot of expenditure (expenditure) to finance its activities. These
expenditures are not only to run the daily administration but also to finance economic
activities. Based on Permendagri No.13 Tahun 2006[7] shopping is grouped into two
namely indirect shopping and direct shopping. Indirect expenditure is spending that is
considered not directly related to the implementation of programs and activities.
2.3 The Effect of Local Own Source Revenue to Local Budget
Several studies have been conducted to see the effect of regional income on spending.
Abdullah and Halim (2003) [8] found that the tax-spend hypothesis applies to the case
of regional goverment in several Latin American countries, namely Columbia, the
Dominican Republic, Honduras, and Paraguay. Friendman (1978) [9] states that the tax
will increase regional spending, so that it will increase the deficit. Hoover and Sheffrin
(1992) [10] empirically found differences in relations in two different time frames.
They found that for the data sample before the mid-1960s taxes affected spending,
while for the sample data after the 1960s taxes and expenditure did not affect each other
(causally independent). Satria & Munandar (2017) [11] states that changes in the target
of Regional Original Revenue can affect the allocation of expenditure changes in the
same year. From the perspective of agency theory, at the time of pure Local Goverment
MIICEMA 2019 - Malaysia Indonesia International Conference on Economics Management and Accounting
594
Budget compilation, the executive (and possibly also with the knowledge and / or
legislative agreement) Local Own Source Revuenue targets are set below the potential,
then carried out adjusment when the budget changes are made. Based on the discussion
above, the proposed research hypothesis can be described as follows:
H: The Local Own Source Revenue influences to Local Budget in Provinces in
Indonesia
Fig.1. Research Framework.
3 Research Methods
The population in this study is the Report on Local Government Finances which in
obtaining from Local Government Budget which in the form of data about Local
Government Budget at Province in Indonesia start from 2013 to 2017 on Local
Government Finances with a period of perception during 5 year. In this study using the
census method, namely by taking the entire population. The object of research is the
Regional Budget in Indonesia. In this study, the location of the study is the center of
financial data for provinces in Indonesia with a data center obtained from the
Directorate General of Fiscal Balance, Ministry of Finance of the Republic of
Indonesia.
The data used in this study are secondary data, that is data that already exists and
do not need to be collected by the researcher themselves (Sekaran, 2006: 77)[12]. The
data collection technique uses documentation.. The analytical method used in this study
is simple linear regression which aims to test and analyze the effect of the Local Own
Source Revenue to Local Budget in the provinces in Indonesia. Data is processed using
the SPSS program. The linear regression model in this study is as follows:
Y = α + β
1
X
1
+ e (1)
4 Results
Descriptive statistical results for Local Budget (LB) and Local Own Source Revenue
(LOSR), can be seen in the following Table 1:
Table 1. Descriptive Research Data.
Va
r
N Min Max Mean Std. Dev
LB
LOSR
170
170
77,8
1,3
51.066,0
43.901,5
7,2
3,7
8,4
6,6
Based on table 1, the Regional Expenditure Budget Results for 5 years, from 2013 to
2017, the mean value of 7.2 trillion Rupiahs, the minimum value of regional
Local Own Source
Revenue
Local Budget
The Effect of Local Own Source Revenue to Local Budget
595
expenditures of 77.8 billion for North Kalimantan Province in 2013 whereas the
maximum value for Dearah Expenditures is 51.0 Trillion Rupiahs for DKI Jakarta
Province in 2017. The standard deviation value for 3 years of observation is 8.4. The
next variable is Regional Original Revenue obtained a mean value for 5 years
amounting to 3.7 trillion Rupiahs, with a minimum value of 1.3 billion Rupiahs for
North Kalimantan Province in 2013, and a maximum value of 43.9 trillion Rupiahs
obtained by DKI Jakarta Province in 2017. The standard deviation value for 5 years of
observation was 6.6.
The results of hypothesis testing using linear regression from the influence of the
Local Own Source Revenue to Local Budget in Provinces in Indonesia can be seen in
the following:
Y = 4,605 + 0,891 X1 + e (2)
The results showed that the Local Own Source Revenue had a positive effect on
Local Budget in Provinces in Indonesia. This means that if the Local Own Source
Revenue increases Rp. 1 then Local Budget will also increase by Rp. 0.891.
This means that the Local Own Source Revenue also increase Local Budget. These
results explain that provinces that get large Local Own Source Revenue will tend to
have large Local Budget as well. These results provide a strong indication that the
behavior of regional spending will be strongly influenced by sources of revenue, one
of which is from local own source revenue. The greater the acceptance of the Local
own source revenue, the more it reflects a region or province capable of being
independent to offset budgeted local budget expenditures.
In Indonesia, in general, Local Own Source Revenue are allocated to Capital
Expenditure, Local Own Source Revenue Budgets are also allocated for employee
operational expenditure. That is because personnel expenditure will be expected to
improve the performance of the regional apparatus to continue trying to improve public
services, the provision of adequate infrastructure facilities. Furthermore, it can also
improve the administrative capabilities of tax collection and levies in the region so that
an important source of regional revenue namely the Local Own Source Revenue can be
used to finance both physical and non physical development (Satria & Munandar, 2017)
[11]. This was also expressed by Abdullah (2013) [13] who stated that changes in
income, especially Local Own Source Revenue, could be based on the opportunism of
decision makers, especially the bureaucracy in regional work unit. But not infrequently
the changes in the
Local Government Budget also contain the political preferences of
politicians in the Assembly at Provincial.
References
1. Undang-Undang No. 25 Tahun 1999. Tentang Perimbangan Keuangan Pusat dan Dearah.
2. Undang-Undang No. 33 Tahun 2004 tentang Perimbangan Keuangan antara Pemerintah
Pusat dengan Daerah
3. Halim, Abdul. 2001. Manajemen Kuangan Daerah. Yogyakarta: UPP AMP YKPN.
4. Undang-Undang No.34 Tahun 2000 tentang Pajak dan Retribusi Daerah.
5. Peraturan Pemerintah No 58 tahun 2005 tentang Pengelolaan Keuangan Daerah
6. Mardiasmo ,2002. Akuntansi Sektor Publik, Penerbit Andi, Yogyakarta.
MIICEMA 2019 - Malaysia Indonesia International Conference on Economics Management and Accounting
596
7. Peraturan Menteri Dalam Negeri No. 13 tahun 2006 tentang Pedoman Pengelolaan keuangan
Daerah.
8. Abdullah, Syukriy dan Abdul Halim. 2003. Pengaruh Dana Alokasi Umum (DAU) dan
Pendapatan Asli Daerah (PAD) terhadap Belanja Pemerintah Daerah: Studi Kasus
Kabupaten/Kota di Jawa dan Bali. Simposium Nasional Akuntansi, Oktober. Surabaya:
Universitas Airlangga.
9. Friedmen, Milton. 1978. The Limitation and Tax Limitation. Policy Review 5, Summer 1978,
pp. 7-14.
10. Hoover, Kevin D. & Sheffrin, Steven M. 1992. Causation, Spending, and Taxes: Sand in The
Sandbox or Tax Collector for the Welfare State. The American Economic Review. Vol. 82
No. 1. Mar 1992. Pp. 225-248.
11. Satria, Dy Ilham dan Munandar. 2017. Model Pemanfaatan Pendapatan Asli Daerah dan
Dana Alokasi Khusus dalam APBD Kabupaten/Kota Di Provinsi Aceh. Jurnal Visoner &
Strategis. Vol. 6 No. 2. September 2017 pp. 1-7.
12. Sekaran, Uma. 2006. Research Methods for Business. Buku Satu, Edisi keempat.
Jakarta: Salemba Empat.
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Pendapatan Asli Daerah (PAD) terhadap Belanja Pemerintah Daerah: Studi Kasus
Kabupaten/Kota di Jawa dan Bali. Simposium Nasional Akuntansi, Oktober. Surabaya:
Universitas Airlangga.
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