RESUME

PEREKONOMIAN INDONESIA
FISCAL POLICY

IDA AYU WIDYAWATI

1306305071

25

FACULTY OF ECONOMY AND BUSINESS

UDAYANA UNIVERSITY
2015
2. Budget Preparation Procedures
There are three kinds of budget is for the central government, known as the State
Budget (Budget of the State), for the provincial government, known as the budget (Budget and
Expenditure) Province and for the county / city, known as the district budget / city. Each budget
has units in which the budget revenues and expenditures incurred obtained. Units of work for the
state budget is all departments, such as the Ministry of Interior, Ministry of Education, state
department, department of religion, the defense department, the department of labor and
transmigration, and so on. Units of work for the governor's office is provincial budget, and
agencies such as the department of agriculture, department of national education, religious
services, labor offices and transmigration, health services, and other agencies. While working for
the district budget units / city is the office of regent / mayor, and sub-districts. In the district
office managed all matters relating to the relevant sub-district, for example health affairs,
education, agriculture, land, and so on.
Procedures budget preparation systems use a bottom-up, which means starting from the
bottom of the unit and then to the higher unit. All work units mentioned above to budget revenue
and expenditure every year. For example, the department of public works, they draw up the
budget revenues and budget follow a predetermined pattern. For example, on budgets,
expenditures distinguished become routine costs and development costs. It's clear in the
guidelines for preparing budgets, expenditures which include routine expenses and expenses
which include development expenditure. In the department also budgeted amount of revenue for
the fiscal year that were made, how the budget for domestic revenue and grants which are both
from within and from abroad. It is clear, that the income and expenditure of this department may
be did at province or district / municipality. In such a case it is still included in the post budget
department concerned, not at the same office in the province or district where the budget activity
occurs. For example, a highway that lies between districts within or between provinces, all of
which was included in the budget department of public works. So that also the case with the
national education departments, universities and colleges, although located in a sub-district,
district or a particular province, remained a part of the budget of the Ministry of Education. In
the case of a university or college got help from provincial and / or district / city governor, that
part was not included in the budget of the Provincial Government and / or District / City.
 The unit also work at the provincial level to budget revenues and expenditures each
year. For example, the national education authorities prepare annual budget and as is the case
with the public works department of the above, it is clear which activities are incorporated into
routine expenditure and development expenditure. Likewise for budget revenues. Similarly,
moved at a unit at the district / municipality, namely the sub-district and district head office,
preparing the budget revenues and expenditures each year.
With the state budget has been determined, the source of local government funds from
the state budget can be known and therefore Provincial Budgets and Regency / City can be
prepared to be submitted to the Provincial DPRD and Regency / City for approved and enacted
into Regional Regulation and then implemented by the local government.

3. Budget (APBN) Structure

Budget structures or components that make up the state budget such as revenues and
expenditures. In Table 1 show that the state budget is always in deficit, and it turns out revenue
and government spending has grown more than doubled within a period of 5 years (2000-2007).
Tabel 1: State Budgeting (2002-2007) (in billion Rupiah)
2002 2003 2004 2005-P 2006-P 2007-P
Revenue and grants 298.60 341.39 394.93 540.12 659.115 694.08
Domestic Revenue 5 6 4 6 654.88 8
Tax revenue 298.52 340.92 349.40 532.67 2 690.26
Domestic tax revenue 8 9 0 1 452.05 5
- Income tax 210.08 242.04 272.17 351.97 3 492.011
Non-oil
8 8 5 4 410.22 474.55
Oil and Gas
- Value Added Tax 199.51 230.93 260.22 334.40 6 1
- Land and building tax 2 4 4 3 213.69 251.47
- BPH on land and building
- Exice 101.87 115.016 133.96 180.25 8 8
- Other tax 4 95.293 8 3 175.01 214.48
International trade taxes 84.404 19.723 120.83 143.01 2 1
- Import duty 17.469 77.082 5 7 35.686 37.268
- Export tax
65.153 8.677 13.133 37.236 132.87 152.05
Non taxes revenue
6.228 2.229 86.273 102.67 6 7
Natural resources revenue
 - Crude oil 1.600 26.277 8.031 1 18.154 22.026
- Natural gas 23.189 1.654 2.668 13.375 4.386 3.966
- Another SDA
1.463 11.114 87.671 3.661 38.523 42.035
Part of SOE profits
10.575 10.885 1.614 32.425 2.590 2.720
Indonesian Bank Surplus
10.344 230 11951 2.198 14.827 17.460
Other non-tax revenue
231 98.880 11.636 17.750 13.853 14.418
Hibah/Grant
88.440 67.739 315 16.691 1.244 3.042
State Expenditures
64.755 48.471 77.125 980 229.82 198.25
Central government expenditures
47.686 12.631 47.241 180.69 9 4
Routine expenses
12.325 6.238 28.248 7 165.69 115.053
- Personnel expenditure
- Goods expenditure 4.744 12.833 15.754 144.36 5 78.235
- Debt interest payment 9.760 - 3.238 1 122.96 29.484
Domestic debt
Foreign loan - 18.308 11.454 102.19 4 7.334
- Subsidies 13.925 468 - 6 36.825 21.800
Fuel subsidies
78 376.50 18.430 36.364 5.906 13.669
Non-fuel subsidies
Tax paid by the government 322.18 5 634 5.801 20.800 47.731
- Social assistance
0 256.19 374.35 12.000 - 3.823
Other routine expenses
223.97 1 1 - 43.334 752.37
Development expenditure
6 186.94 255.30 24.336 4.233 3
Financing dollars
186.65 4 9 7.455 699.09 498.17
Project financing
Budget for the region (APBD) 1 47.662 184.43 565.07 9 2
- Fund balance 39.480 14.992 8 0 478.25 426.48
Funds for result
General allocation fund 12.777 65.351 56.738 411.667 0 8
Special allocation fund 87.667 46.356 17.280 326.92 408.47 97.983
Special autonomy fund and balancing 25.406 18.995 65.651 4 0 61.824
62.621 43.899 41.276 61.167 79.075 83.555
43.628 30.038 24.375 42.312 55.992 58.803
31.162 9.901 26.362 60.982 82.495 24.752
12.466 3.960 14.507 42.307 58.115 105.07
- - 10.995 18.675 24.340 3
- 15.402 840 119.089 107.62 55.604
 3.099 69.247 - 89.194 8 46.469
37.325 47.510 18.407 23.643 80.609 0
25.608 21.737 70.871 6.253 21.367 52.272
11.717 120.31 50.500 - 5.651 25.781
98.204 4 20.371 43.374 41.018 71.684
94.657 111.070 119.042 84.743 42.262 70.826
24.884 31.730 112.187 54.747 69.780 23.205
69.159 76.978 26.928 29.997 55.258 254.20
613 2.723 82.131 153.40 25.475 1
3.548 9.244 3.128 2 220.85 244.60
3.855 146.16 0 8
0 216.97 62.726
52.567 8 164.78
88.766 59.564 7
4.828 146.66 17.904
7.243 4 9.593
11.570
4.052
Source: BPS like on the BI.LPI 2007

4. Budget Changing and Realization

In the implementation, throughout the fiscal year (1 January to 31 December) it is very
possible occur the changes in the economy so that the assumptions used are no longer correspond
to reality. Finally, its necessary to adjust the state budget. Budget that is adjusted called Revised
Budget (APBN-P). Revised Budget is made every year around the month of October because
always there is a difference between assumptions and reality. Should be understood that the state
budget laid out in the budget so that, therefore, very likely differ from actual numbers as shown
in Table 2.

Tabel 2 : The differences between revised stated budget and the realization for 2006 - 2007
Stated Budget for 2006 Stated Budget for 2007
 Changes Realization (2) : (1) Changes Realization (3) : (4)
(1) (2) (3) (4)
Revenue and grants 659.115 637.797 0,968 694.088 708.494 1,021
Domestic Revenue 654.882 635.940 0,971 690.255 706.791 1,024
Tax revenue 452.053 409.055 0,962 492.011 491.835 1,000
Domestic tax revenue 410.226 395.822 0,965 474.551 470.906 0,992
International trade taxes 14.827 13.223 0,892 17.460 20.929 1,199
Non taxes revenue 229.829 226.885 0,987 198.254 214.956 1,084
Hibah/Grant 4.233 1.857 0,439 3.823 1.704 0,446

State Expenditures 699.099 670.591 0,959 752.373 757.245 1,006

Central government expenditures 478.250 444.197 0,929 498.172 503.977 1,012
Routine expenses 408.470 385.266 0,943 426.488 439.570 1,031
Development expenditure 69.780 58.931 0,845 71.684 64.407 0,898
Budget for the region (APBD) 220.850 226.934 1,025 254.201 253.268 0,996
Source: BPS like on the BI.LPI 2007

5. Financing the Deficit Budgeting

It has explained before that whether APBN or APBD can be surplus, balance, or deficit.
Actually there would not be such a matter if APBN or APBD is surplus, because national or
regional income is greater than national or regional spending. This surplus can be used for the
next years national or regional spending. But several years ago, some of APBD in certain
regions were surplus, and half or almost the entire surplus were used to buy SBI (Sertifikat Bank
Indonesia). This kind of thing got a bad response from the society because it seemed to be unfair
if we talk about the interest income from this SBI, what it will be used for? Even some of the
society thought that the interest income from SBI could be corrupted.
At the era of Soekarno (Orde Lama), the government was always faced deficit on the
APBN, because the income from tax was very small but the spending was always increased. To
solve this problem, the government used deficit spending system. In this system, to solve the
problem of national spending that was greater than the income, the government printed more
money to pay all the exceeded amount of spending.
 Actually, the source to finance the deficit budgeting can be from abroad or within the
country itself, as follows:
1. The source of financing the deficit budgeting within the country:
a. Bank
b. Non bank
(1) The income from privatized state company
(2) The income from selling banks restructuring assets (aset restrukturisasi perbankan)
(3) The income form selling national bonds
(4) The governments investment funds
2. The source of financing the deficit budgeting from abroad can be from the payment of
account receivables from other countries minus by the installment of the states account
payables to other countries.
Payment of Account Receivables Installment of Account Payables

6. The Pattern of Government Revenue

Fiscal policy in general (also in Indonesia) consist of revenue policy and state spending
policy. Revenue of the government of Indonesia divided into :
a. Domestic revenue, the all kinds of revenue from tax and non tax
b. Grant (hibah), the assistance from the thirt parties to the government that can be assintance
from domestic or from abroad.
The domestic revenue can be divided into :
a. The revenue from the tax, can be direct tax and indirect tax. It can be also the tax from
domestic and the tax from international trading
b. The revenue from non tax (Penerimaan Negara Bukan Pajak), this revenue can be from tuition
fee (uang pembayaran SPP), the revenue from the selling of the seed from the departement
that made the seed for society, and the revenue from government assets that sold to the public.
The government revenue from tax can be divided into :
a. Domestic tax, consist of : Pajak Penghasilan (PPh) from migan and non migas, Pajak
Pertambahan Nilai (PPN), Pajak Bumi dan Bangunan (PBB), Bea Perolehan Hak Atas Tanah
dan Bangunan, cukai, and the other tax.
b. International trading tax, consist of impor and export tax

7. Government Spending Patterns

State budget / government consists of the budget for the Central Government and Local
Government. In the result of budgeting, budget for the central government two times greater than
the budget for Local Government.

8. The Influence of The State Budget for The Money Supply

We all know that monetary policy in the broadest sense is a monetary policy in the
narrow sense (money and financial institutions) and the policy of APBN. Thus, the APBN is a
instrument of monetary policy. Because of every rupiah that taken from the community and into
the state treasury (kas negara) will affect the amount of money circulating in the community.
Similarly, every rupiah that comes out of the government, whether it is used to pay the salaries of
employees or pay a subsidy or to finance development projects will increase the amount of
money circulating in the community. So, all revenue and expenditure activity will affect the
amount of money circulating in the community.
If the number of (realization) state spending exactly the same amount (realization) state
revenue, for example Rp 1.000 trillion, the amount of money circulating in the community such
as reduced by the amount of revenues and the same amount of money circulating in the
community increases as spending state. If the realization of APBN is deficit, this is often referred
to as deficit spending, which is already familiar situation occurs when the Old Order. Suppose
the state expenditures amounted to Rp 1.000 billion, while revenue was only Rp 900 billion, so
the amount of money circulating in the community increased state spending amounted (Rp 1000
billion) and a reduction of revenue to Rp 900 billion. The remaining Rp 100 billion financed
through borrowing on (advances of) Bank Indonesia as a cashier country and through short-term
loans (T bill) to the society. Loans from Bank Indonesia is not a withdrawal of money circulating
in the community, while T bill is uptake of money in society by the government. Lets say if T
bill worth Rp 50 billion, then in terms of deficit spending will result in increase the amount of
money circulating in the community a number of state revenues coupled with T bill, amounting
to Rp 950 billion. The net result of this fiscal policy is the money supply increased by Rp 50
billion (for an advance of Bank Indonesia). The situation will be the same when used by the
state is not an advance of Bank Indonesia, but by printing money.
If the realization of the APBN is in surplus, greater revenues from state spending. This
often occurs in the Budget Indonesia under Soeharto until now and in the developed countries.
Let's say the realization of Rp 1,000 trillion national budget for expenditures and state revenues
of Rp 1,100 trillion. In this state the amount of money in circulation was reduced by Rp 1,100
trillion and Rp 1,000 trillion increase, so the net result of the APBN is the money supply was
reduced by Rp 100 trillion (a surplus in the APBN).

9. Tax Policy and Government Spending

As we know the difference between the government expenditure budget with private
households budget located in the budgeting phase, in which the individual household expenditure
budget determining income are first time as the basis for determining the budget expenditure, on
the contrary, government and social institutions budgets firstly determine the amount of
expenditure as a basis for determining how much and from which the expenditure burden
sourced. In this discussion portrayed a balanced budget, both government spending and taxes
both have an influence on national income.
The influence of government expenditure to national income. Routine government
spending and paid for community development. That means additional revenue for the
community so that they tend to increase their consumption (the marginal propensity to Consume)
and increase their savings (marginal propensity to Save). MPC and MPS are usually expressed in
proportion to income (Y) so that the MPC + MPS = 1 times the amount of income. Additional
consumption by the first people received by the second as income, so that second people tend to
increase consumption and savings, consumption made by the second is the income of the third
and the third person will tend to increase the consumption and savings, and so on until the
number of infinite. The amount of the increase in income of the community as a result of the
government spending is multiplied by a multiplier factor (k = 1 / MPS). If people get additional
income, propensity to save an additional 20 percent of his income then k = 1 / 0.20 = 5.
 The tax effect on national income. To finance its expenditure, the government taxes
from the people that resulted in a decrease of return of those who pay taxes. This may result in
reduced propensity to consume and to save. Total income of the community is reduced because
there is a tax for the tax is multiplied by a multiplier factor (k = - (1 / MPS -1)). If the decreased
revenue due to tax and reduce the propensity to save 20 percent of the total reduction in income,
for tax k = - (1 / 0.20 -1) = -4.
Multipliers for a balanced budget. In a balanced budget, the amount of government
spending equal to the amount of tax, as a result of the national income are: the amount of the
increase in national income as a result of government spending ((1 / MPS) times the amount of
government expenditure)) minus the amount of the reduction of national income from taxes (-
(1 / MPS-1) times the tax)). Additional net income due to a balanced budget is (1 / MPS) - (1 /
MPS-1) = 1 time a balanced budget.
Government savings and economic development. Economic development of a state-
financed either from domestic sources include personal savings, corporate savings and
government savings, and foreign sources include foreign investment, directly or indirectly.
What is meant by saving the government in Indonesia are all domestic revenue minus
all routine expenses and budget for centrally funded areas.