Local Government Organization and Finance: Indonesia
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T A B L E 7 . 5 Subnational Taxes Type of tax
Level
Tax base
Motor vehicle tax Motor vehicle transfer tax Fuel excise tax
Provincial Provincial Provincial
Water excise tax Hotel tax Restaurant tax Entertainment tax Advertisement tax Street lighting tax
Provincial Local Local Local Local Local
Mining tax for class C mineralsa Parking tax
Local
Vehicle value (annual) Vehicle resale price (annual) Fuel consumption (retail price, excluding VAT) Water consumption Turnover Turnover Turnover (admission price) Advertisement rent Electricity consumption (retail price, excluding VAT) Market value of extracted minerals Parking fees
Local
Cap (%)
5 10 5 20 10 10 35 25 10 20 20
Source: Law 34/2000; World Bank 2003; PWC 2005. a. Class C minerals include asbestos, slate, semiprecious stone, limestone, pumice, precious stone, bentonite, dolimite, feldspars, halites, graphite, granite and andesite, gypsum, calcite, kaolin, leucite, magnesium, mica, marble, nitrate, obsidian, ocher, sand and gravel, quartz sand, perlite, phosphate, talc, fuller’s earth, diatom soil, clay, alum, trass, yarosite, zeolite, basalt, and tracite.
In addition, article 2 of Law 34/2000 states that local governments have the right to impose new local taxes as long as those taxes comply with eight general “good tax” principles:
They are taxes, not user charges. The tax base is located in the region and immobile. The taxes do not conflict with public interest. The tax base is not subject to provincial and national taxation. The revenue potential is adequate. The taxes do not exert economic distortions. Equity concerns are taken into account. Environmental sustainability is taken into account.
In addition, Law 33/2004 prohibits local governments from establishing own-source revenues that impose high costs on the economy or restrict the mobility of people and goods and services across internal borders or constrain international imports and exports. This provision was introduced in reaction to the imposition of taxes on interjurisdictional trade by some local governments (Ray 2003). The right to impose new taxes and user charges is
