Provincial Fiscal Autonomy in Indonesia: Revenue Capacity, Spending Structure, and HKPD Reform
DOI:
https://doi.org/10.32500/jematech.v9i2.12308Keywords:
Fiscal autonomy, Fiscal reform, HKPD, Local tax, Panel dataAbstract
Provincial fiscal independence remains a central challenge within Indonesia's decentralized fiscal system, as provincial governments continue to depend substantially on transfers from the central government. This study examines the associations between local tax revenue, regional levies, personnel expenditure, and the HKPD fiscal reform (Law No. 1 of 2022) with provincial fiscal independence in Indonesia. Using an unbalanced panel dataset of 178 observations drawn from 38 provinces over the period 2020–2024, this study applies a Fixed Effects Model with cluster-robust standard errors at the provincial level, as indicated by the Hausman test (χ²(4) = 14.79, p = 0.005). The results indicate that local tax revenue and regional levies are positively and significantly associated with provincial fiscal independence, with coefficients of 1.105 and 0.247 respectively. Personnel expenditure is also positively and significantly associated with fiscal independence (coefficient = 0.130), suggesting that provinces with stronger administrative capacity tend to exhibit both higher personnel costs and greater fiscal independence. The HKPD dummy variable shows a negative and statistically insignificant coefficient (−0.006), indicating no detectable difference in fiscal independence between pre- and post-reform periods within the panel, which may reflect identification constraints when year fixed effects are included in the model. These findings underscore the importance of strengthening local tax administration and own-source revenue mobilisation in advancing provincial fiscal autonomy in Indonesia.
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