REGULATION OF FISCAL CAPACITY

IN INDONESIA

BY :
DICKY TRYADI
MUHAMMAD AGUNG ZANDRA
NAURAH ATIKA DINA
RANA SYIFA MEDINDA

FINANCIAL STATE AND LOCAL

INTERNATIONAL ACOOUNTING
ECONOMICS FACULTY
ANDALAS UNIVERSITY

SOURCE OF REGIONAL ADMISSION

Article 5

(1) Regional Revenues in the implementation of Decentralization consist of Regional

 Revenues and Financing.
(2) Regional Revenues as referred to in paragraph (1) are sourced from:
      -Locally-generated revenue;
      -Balancing Fund; and
- Other Income.
(3) Financing as referred to in paragraph (1) comes from:
- the remaining more regional budget calculations
- receipt of Regional Loans
- Regional Reserve Fund; and
- proceeds from the sale of Regional assets that are separated.

CHAPTER V
LOCALLY-GENERATED REVENUE
Article 6

(1) PAD comes from:

- Local tax
- Regional Retribution
- the results of the management of separated Regional asset
- other legitimate PAD.

(2) Other legitimate PAD as referred to in paragraph (1) letter d, include:

- proceeds of sale of Regional assets that are not separated;
- current account service
- interest income
- profit from the difference in the rupiah exchange rate against foreign currencies
- commissions, deductions, or other forms as a result of the sale and / or
procurement of goods and / or services by the Region.

CHAPTER VI
BALANCE FUND

Part One
Type
Article 10
(1) Balance Funds consist of:
     - Revenue Sharing Funds
     - General Allocation Fund
     - Special Allocation Fund.

(2) The amount of the Balancing Fund as referred to in paragraph (1) is stipulated
every budget year in the APBN.
The second part
Revenue Sharing Funds
Article 11
(1) Sharing Funds from tax and natural resources.
(2) Profit Sharing Funds sourced from tax as referred to in paragraph (1) consist of:
- Land and Building Tax (PBB)
- Fees for Obtaining Land and Building Rights (BPHTB)
- Article 25 Income Tax (PPh) and Article 29 Domestic Individual Taxpayers and
Article 21 Income Tax.

(3) Profit Sharing Funds sourced from natural resources as referred to in paragraph (1)
originate from:
- forestry
- general mining
- fishery
- petroleum mining
- natural gas mining
- geothermal mining.

Article 12

(1) Profit Sharing Funds from the receipt of PBB and BPHTB as referred to in Article
11 paragraph (2) letters a and b are divided between the provinces, regencies /
cities, and the Government.
(2) Profit Sharing Funds from UN revenues amounting to 90% (ninety percent) for the
Regions with the following details:
- 16.2% (sixteen two-tenths of a percent) for the relevant provincial area and
distributed to the Provincial General Cash Account
- 64.8% (sixty four eight tenths of a percent) for the relevant regency / city area
and distributed to the District / City General Cash Account
- 9% (nine percent) for collection fees.
(3) 10% (ten percent) of the Government's share of UN revenue is distributed to all
regency and city regions based on the realization of UN revenues in the current
budget year, with the following balance:
- 65% (sixty-five percent) is distributed equally to all districts and cities; and
- 35% (thirty-five percent) is distributed as incentives to regency and city areas
whose previous year's realization reaches / exceeds certain sector revenue plans.
(4) Profit Sharing Funds from BPHTB receipts are 80% (eighty percent) with the
following details:
- 16% (sixteen percent) for the relevant provincial region and distributed to the
Provincial General Cash Account
- 64% (sixty four percent) for producing regencies and cities and distributed to
the District / City General Cash Account.
(5) 20% (twenty percent) of the Government's share of BPHTB revenue is distributed
with the same portion for all districts and cities.
(6) Distribution of UN and BPHTB Profit Sharing Funds as referred to in paragraph
3 and paragraph 4 shall be carried out in accordance with the laws and
regulations.

Article 13
(1) Profit Sharing Funds from receipt of Article 25 and Article 29 Income Tax for
Individual Domestic Taxpayers and Article 21 Income Tax as referred to in
Article 11 paragraph (2) letter c which constitutes part of the Region is 20%
(twenty percent).
(2) Revenue Sharing Funds from the receipt of PPh as referred to in paragraph (1) are
divided between the provincial and regency / city Regional Governments.
(3) Profit Sharing Funds from receipt of Article 25 and Article 29 Income Tax for
Individual Domestic Taxpayers and Article 21 Income Tax as referred to in
paragraph (1) divided by 60% (sixty percent) for districts / cities and 40% (four
fifty percent) for the province.
(4) Distribution of Profit Sharing Funds as referred to in paragraph (3) shall be carried
out quarterly.

Article 14

Distribution of State Revenues originating from natural resources as referred to in

Article 11 paragraph (3) shall be determined as follows:
a. Forestry receipts originating from the receipt of Forest Concession Fees (IHPH)
and Forest Resource Provisions (PSDH) produced from the relevant regions are
divided into 20% (twenty percent) for the Government and 80% (eighty percent)
for the Regions .
b. Forestry revenues originating from the Reforestation Fund are divided by a balance
of 60% (sixty percent) for the Government and 40% (forty percent) for the
Region.
c. Receipt of General Mining produced from the region of the region concerned,
divided by the balance of 20% (twenty percent) for the Government and 80%
(eighty percent) for the Region.
d. Fisheries received nationally are divided into 20% (twenty percent) for the
Government and 80% (eighty percent) for all districts / cities.
e. Receipt of Petroleum Mining produced from the relevant Regional region after
deducting other tax and levies components in accordance with the laws and
regulations, divided by:
- 84.5% (eighty four and a half percent) for the Government
- 15.5% (fifteen and a half percent) for the Region.
f. The acceptance of natural gas mining that is produced from the region of the region
after deducting the component of taxes and other levies in accordance with the
laws and regulations, divided by:
- 69.5% (sixty nine and a half percent) for the Government
- 30.5% (thirty and a half percent) for the Region.
g. Geothermal Mining produced from the relevant Regional territory which is a
Non-Tax State Revenue, divided by a balance of 20% (twenty percent) for the
Government and 80% (eighty percent) for the Region.

Article 15

(1) Profit Sharing Funds from IHPH revenues that are part of the Region as referred
to in Article 14 letter a, divided by details:
- 16% (sixteen percent) for the province; and
   - 64% (sixty four percent) for producing districts / cities.
(2) Profit Sharing Funds from PSDH revenues that are part of the Region as referred
to in Article 14 letter a, are divided into details:
- 16% (sixteen percent) for the province concerned32% (thirty two percent) for
producing districts / cities
- 32% (thirty two percent) is distributed with the same portion for other districts /
cities in the province concerned.

Article 16
Profit Sharing Funds from the Reforestation Fund as referred to in Article 14 letter b:
- 60% (sixty percent) of the Government's share is used for forest and land
rehabilitation nationally; and
- 40% (forty percent) of the area is used for forest and land rehabilitation activities in
producing districts / cities.

Article 17
(1) Receipt of General Mining as referred to in Article 14 letter c consists of:
    - Acceptance of Fixed Fees (Land-rent)
    - Receipt of Exploration Contributions and Exploitation Contributions (Royalties).
(2) Profit Sharing Funds from the State-Owned Permanent Contribution (Land-rent)
which are part of the Region as referred to in paragraph (1) letter a, divided by
details:
    - 16% (sixteen percent) for the province concerned; and
    - 64% (sixty four percent) for producing districts / cities.
(3) Profit Sharing Funds from State Revenues of Exploration Contributions and
Exploitation Contributions (Royalties) that are part of the Regions as referred to
in paragraph (1) letter b, are divided by details:
    - 16% (sixteen percent) for the province concerned;
    - 32% (thirty two percent) for producing districts / cities; and
    - 32% (thirty two percent) for other districts / cities in the province concerned.
(4) The regency / city portion as referred to in paragraph (3) letter c, shall be
distributed with the same portion for all districts / cities in the relevant province.

Article 18
(1) Fisheries Revenues as intended in Article 14 letter d consist of:
    - Receipt of Fishery Business Expenses; and
    - Fisheries Product Collection Receipts.
(2) Profit Sharing Funds from State Revenues in the fisheries sector as referred to in
Article 14 letter d shall be distributed with an equal portion to districts / cities
throughout Indonesia.

Article 19
(1) Receipt of Petroleum and Natural Gas Mining distributed to the Regions is State
Revenues from natural resources of Petroleum and Natural Gas from the relevant
Region, after deducting other tax and levies components.
(2) Profit Sharing Funds from Petroleum Mining as referred to in Article 14 letter e
number 2 shall be 15% (fifteen percent) divided by the following details:
    - 3% (three percent) distributed to the province concerned;
    - 6% (six percent) distributed to producing districts / cities; and
    - 6% (six percent) is distributed to other districts / cities in the province concerned.
(3) Profit Sharing Funds from Natural Gas as referred to in Article 14 letter f number
2 are 30% (thirty percent) divided by the following details:
    - 6% (six percent) distributed to the province concerned;
    - 12% (twelve percent) is distributed to producing districts / cities
   - 12% (twelve percent) is distributed to other districts / cities in the province
concerned.
(4) The regency / city portion as referred to in paragraph (2) letter c and paragraph (3)
letter c, shall be distributed with the same portion for all districts / cities in the
relevant province.

Article 20
(1) Profit Sharing Funds from Petroleum and Natural Gas as referred to in Article 14
letter e number 2 and letter f number 2 shall be 0.5% (half a percent) allocated to
increase the basic education budget.
(2) Revenue Sharing Funds as referred to in paragraph (1) are divided into details as
follows:
    - 0.1% (one tenth percent) distributed to the province concerned;
    - 0.2% (two tenths of a percent) is distributed to producing districts / cities; and
 - 0.2% (two tenths of a percent) is distributed to other districts / cities in the
province concerned.
(3) The regency / city portion as referred to in paragraph (2) letter c, shall be
distributed with the same portion for all districts / cities in the relevant province.

Article 21
(1) State Revenues from Geothermal Mining as referred to in Article 14 letter g
constitute Non-Tax State Revenues consisting of:
    - Deposit of Government Parts; and
    - Fixed contributions and production fees.
(2) Profit Sharing Funds from Revenue from Geothermal Mining distributed to the
Regions as referred to in Article 14 letter g divided by details:
    - 16% (sixteen percent) for the province concerned;
    - 32% (thirty two percent) for producing districts / cities; and
    - 32% (thirty two percent) for other districts / cities in the province concerned.
(3) The regency / city portion as referred to in paragraph (2) letter c, shall be
distributed with the same portion for all districts / cities in the relevant province.

Article 22
The government determines the allocation of revenue sharing funds derived from
natural resources in accordance with the basic determination of calculation and
producing regions.
 Article 23
Revenue Sharing Funds which are part of the Region as referred to in Article 11 are
distributed based on the realization of current budget year revenues.

Article 24
(1) The realization of distribution of Profit Sharing Funds originating from the oil and
gas sector does not exceed 130% (one hundred thirty percent) of the basic
assumption of the price of oil and natural gas in the current APBN.
(2) In the event that Profit Sharing Funds from the petroleum and natural gas sector as
referred to in paragraph (1) exceed 130% (one hundred thirty percent), the
distribution shall be carried out through the mechanism of the APBN
Amendment.

Article 25
Violations of the provisions referred to in Article 20 paragraph (1) and paragraph (2)
are subject to administrative sanctions in the form of deduction from the distribution
of Profit Sharing Funds in the oil and gas sector.

Article 26
Further provisions regarding Profit Sharing Funds are regulated by Government
Regulations.

Part Three
General Allocation Fund

Article 27
(1) The total amount of DAU shall be set at least 26% (twenty six percent) of Net
Domestic Revenue determined in the APBN.
(2) DAU for a Region is allocated on the basis of fiscal gap and basic allocation.
(3) The fiscal gap as referred to in paragraph (2) is a fiscal requirement reduced by the
Regional fiscal capacity.
(4) Basic allocation as referred to in paragraph (2) is calculated based on the total
salary of the Regional Civil Servants.

Article 28
(1) Regional fiscal needs are regional funding needs to carry out general basic service
functions.
(2) Every funding requirement as referred to in paragraph (1) is measured in
succession with population, area, Construction Expansion Index, per Gross
 Regional Domestic Product, and Human Development Index.
(3) Regional fiscal capacity is a Regional funding source originating from PAD and
Revenue Sharing Funds.