Heaptalk, Jakarta — Indonesia’s Ministry of Home Affairs, through the Directorate General of Regional Financial Administration (Ditjen Bina Keuda), encourages local governments to provide performance-based incentives for regional tax and levy collections.
Horas Maurits Panjaitan, Acting Director General of Ditjen Bina Keuda, made this call during his virtual address at the 2024 National Coordination Meeting on Regional Revenue, held at the Grand Mercure in Malang, East Java.
According to Article 146 of the Law on Financial Relations between the Central and Regional Governments (UU HKPD), local governments must allocate around 30% of their personnel expenditures, excluding teacher allowances funded through General Allocation Funds (TKD).
These personnel expenses cover civil servants, regional leaders, and local parliament (DPRD) members. If personnel expenses exceed this threshold, regions must adjust within five years from the enactment date of UU HKPD.
“Regions that fail to comply with the specified allocation for regional expenditures may face penalties, including delays or reductions in TKD funds that are not earmarked for specific uses,” Maurits emphasized.
In addition to compliance, Maurits discussed incentives for local tax and levy collection. Per Article 104 of UU HKPD, agencies responsible for tax and levy collection can receive incentives based on specific performance achievements. These incentives are to be formalized through regional budgets (APBD) with adherence to defined procedures.
Maurits urged local governments to offer performance-based incentives as additional income for tax and levy collection agencies, rewarding agencies that meet specific performance criteria. This approach aims to enhance the effectiveness of local governance in alignment with principles of good governance, particularly in optimizing tax and levy potential.
Furthermore, the Ministry of Home Affairs, through Ditjen Bina Keuda, is taking steps to ensure the successful implementation of the new regional tax levy system (Opsen), set to take effect on January 5, 2025. Among these efforts, the Directorate has issued several guidelines, including:
- Letter No. 900.1.13.1/9792/Keuda, issued on July 1, 2024, focused on synergy in tax collection;
- Letter No. 900.1.13.1/14384/Keuda, issued on September 4, 2024, to accelerate Opsen integration;
- Letter No. 900.1.13.1/17525/Keuda, issued on October 15, 2024, outlining preparations for implementing the 2025 regional tax Opsen.
With these actions, Ditjen Bina Keuda aims to strengthen local revenue management frameworks and promote sustainable fiscal policies across regional governments in Indonesia.
