Autonomy with Equity and Accountability : Toward a More Transparent, Objective, Predictable and Simpler (TOPS) System of Central Financing of Provincial-Local Expenditures in Indonesia
During the past decade, Indonesia has transformed itself from centralized governance to decentralized local governance. Local governments were given extensive expenditure responsibilities while keeping the tax system centralized. To finance decentr...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2012/03/15954022/autonomy-equity-accountability-toward-more-transparent-objective-predictable-simpler-tops-system-central-financing-provincial-local-expenditures-indonesia http://hdl.handle.net/10986/19876 |
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oai_dc |
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okr-10986-198762021-04-23T14:03:52Z Autonomy with Equity and Accountability : Toward a More Transparent, Objective, Predictable and Simpler (TOPS) System of Central Financing of Provincial-Local Expenditures in Indonesia Shah, Anwar CENTRAL-PROVINCIAL-LOCAL TRANSFERS SYSTEM CENTRALIZED TAX SYSTEM CITIZEN-BASED ACCOUNTABILITY DECENTRALIZED LOCAL GOVERNANCE FISCAL CAPACITY EQUALIZATION INTERGOVERNMENTAL FINANCE SYSTEM SERVICE DELIVERY During the past decade, Indonesia has transformed itself from centralized governance to decentralized local governance. Local governments were given extensive expenditure responsibilities while keeping the tax system centralized. To finance decentralized provincial-local expenditures, Indonesia implemented a new system of intergovernmental finance. This paper provides a review of the equity and efficiency implications of the current system of central-provincial-local transfers. It finds that the system of intergovernmental finance represents one of the most complex systems ever implemented by any government in the world. The system is primarily focused on a gap-filling approach to provincial-local finance to ensure revenue adequacy and local autonomy but without accountability to local residents for service delivery performance. This is done through a great degree of academic rigor using highly complex procedures. The complexity leads to a lack of transparency, inequity and uncertainty in allocation as well as creating incentives for jurisdictional fragmentation and reducing own-tax effort. Simpler alternatives are available that have the potential to address equity objectives while also enhancing efficiency and citizen-based accountability. Such alternatives would represent a move away from complex gap filling and special allocation approaches to simple, output based transfers to finance operating expenditures. These would be complemented by capital grants to deal with infrastructure deficiencies, and fiscal capacity equalization as a residual program with an explicit standard to ensure that all local jurisdictions have adequate means to deliver reasonably comparable levels of public services at reasonably comparable levels of tax burdens across the country. The paper argues that such an alternative system of intergoveernmental finance would preserve autonomy, while enhancing equity, simplicity, objectivity, transparency and accountability. 2014-08-29T18:46:31Z 2014-08-29T18:46:31Z 2012-03 http://documents.worldbank.org/curated/en/2012/03/15954022/autonomy-equity-accountability-toward-more-transparent-objective-predictable-simpler-tops-system-central-financing-provincial-local-expenditures-indonesia http://hdl.handle.net/10986/19876 English en_US Policy Research Working Paper;No. 6004 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research East Asia and Pacific Indonesia |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
CENTRAL-PROVINCIAL-LOCAL TRANSFERS SYSTEM CENTRALIZED TAX SYSTEM CITIZEN-BASED ACCOUNTABILITY DECENTRALIZED LOCAL GOVERNANCE FISCAL CAPACITY EQUALIZATION INTERGOVERNMENTAL FINANCE SYSTEM SERVICE DELIVERY |
| spellingShingle |
CENTRAL-PROVINCIAL-LOCAL TRANSFERS SYSTEM CENTRALIZED TAX SYSTEM CITIZEN-BASED ACCOUNTABILITY DECENTRALIZED LOCAL GOVERNANCE FISCAL CAPACITY EQUALIZATION INTERGOVERNMENTAL FINANCE SYSTEM SERVICE DELIVERY Shah, Anwar Autonomy with Equity and Accountability : Toward a More Transparent, Objective, Predictable and Simpler (TOPS) System of Central Financing of Provincial-Local Expenditures in Indonesia |
| geographic_facet |
East Asia and Pacific Indonesia |
| relation |
Policy Research Working Paper;No. 6004 |
| description |
During the past decade, Indonesia has
transformed itself from centralized governance to
decentralized local governance. Local governments were given
extensive expenditure responsibilities while keeping the tax
system centralized. To finance decentralized
provincial-local expenditures, Indonesia implemented a new
system of intergovernmental finance. This paper provides a
review of the equity and efficiency implications of the
current system of central-provincial-local transfers. It
finds that the system of intergovernmental finance
represents one of the most complex systems ever implemented
by any government in the world. The system is primarily
focused on a gap-filling approach to provincial-local
finance to ensure revenue adequacy and local autonomy but
without accountability to local residents for service
delivery performance. This is done through a great degree of
academic rigor using highly complex procedures. The
complexity leads to a lack of transparency, inequity and
uncertainty in allocation as well as creating incentives for
jurisdictional fragmentation and reducing own-tax effort.
Simpler alternatives are available that have the potential
to address equity objectives while also enhancing efficiency
and citizen-based accountability. Such alternatives would
represent a move away from complex gap filling and special
allocation approaches to simple, output based transfers to
finance operating expenditures. These would be complemented
by capital grants to deal with infrastructure deficiencies,
and fiscal capacity equalization as a residual program with
an explicit standard to ensure that all local jurisdictions
have adequate means to deliver reasonably comparable levels
of public services at reasonably comparable levels of tax
burdens across the country. The paper argues that such an
alternative system of intergoveernmental finance would
preserve autonomy, while enhancing equity, simplicity,
objectivity, transparency and accountability. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Shah, Anwar |
| author_facet |
Shah, Anwar |
| author_sort |
Shah, Anwar |
| title |
Autonomy with Equity and Accountability : Toward a More Transparent, Objective, Predictable and Simpler (TOPS) System of Central Financing of Provincial-Local Expenditures in Indonesia |
| title_short |
Autonomy with Equity and Accountability : Toward a More Transparent, Objective, Predictable and Simpler (TOPS) System of Central Financing of Provincial-Local Expenditures in Indonesia |
| title_full |
Autonomy with Equity and Accountability : Toward a More Transparent, Objective, Predictable and Simpler (TOPS) System of Central Financing of Provincial-Local Expenditures in Indonesia |
| title_fullStr |
Autonomy with Equity and Accountability : Toward a More Transparent, Objective, Predictable and Simpler (TOPS) System of Central Financing of Provincial-Local Expenditures in Indonesia |
| title_full_unstemmed |
Autonomy with Equity and Accountability : Toward a More Transparent, Objective, Predictable and Simpler (TOPS) System of Central Financing of Provincial-Local Expenditures in Indonesia |
| title_sort |
autonomy with equity and accountability : toward a more transparent, objective, predictable and simpler (tops) system of central financing of provincial-local expenditures in indonesia |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2012/03/15954022/autonomy-equity-accountability-toward-more-transparent-objective-predictable-simpler-tops-system-central-financing-provincial-local-expenditures-indonesia http://hdl.handle.net/10986/19876 |
| _version_ |
1764444001633566720 |