1. FISCAL REFORM (TAXATION) ON LOCAL GOVERNMENT AND THE NEW ADMINISTRATIVE DUTIES Oleh : Dadang Suwanda, SE, MM, M.Ak, Ak, CA MATARAM, 8 MEI 2015 1

2. 2 FISCAL REFORM (TAXATION) ON LOCAL GOVERNMENT AND THE NEW ADMINISTRATIVE DUTIES CHANGES FROM CENTRALIZED TO DECENTRALIZATION SYSTEM REGIONAL AUTONOMY AUTONOMY IN THE FIELD OF FINANCIAL FISCAL REFORM ON LOCAL GOVERNMENT. READINESS OF LOCAL GOVERNMENT IN ANTICIPATING FISCAL REFORMS

3. 3 CHANGES FROM CENTRALIZED TO DECENTRALIZATION SYSTEM CHANGES FROM CENTRALIZED SYSTEM TO DECENTRALIZATION Reforms since 1998 Government System Experiencing The Drastic Changes CentralizationDecentralization Decentralized systems Applicable Regional Autonomy System

4. 4 Decentralization Concentrating all authority over all matters pertaining to the level of the central government

5. 5 Nowadays, the affairs central government are: Religion Overseas Justice Defense Security Monetary within the meaning of printing money, determines the value of money, and so on.

6. 6 Decentralization Handover of authority. In relation to the Indonesian government system, decentralization is often associated with the system of governance Paradigm shift in the Indonesian government.

7. 7 Decentralization in Government Sector Delegation of authority from the central government to the unit of government organizations in the region to meyelenggarakan all local interests of a group of people who inhabit the region. Initiative, authority and responsibility on matters submitted become the responsibility of the central area, both regarding the planning, implementation, reporting and accountability, as well as on the financing terms.

8. 8 The purposes of decentralization are : Preventing financial centralization; As the democratization efforts of local governments to include the people responsible for governance. Preparation of programs for socio- economic improvement at the local level so that it can be more realistic

9. 9 Decentralization can be done through a 4 (four) forms the main activities, namely: Deconcentration of administrative authority Delegation to the ruling authority Devolution to local governments The transfer of the functions of government to the private sector

10. 10 REGIONAL AUTONOMY By Applicability Decentralized SystemBegin Era of Regional Autonomy Decentralized systems Applicable Pula Regional Autonomy System Rights, powers, and obligations of autonomous regions to set up and manage their own affairs and interests of local communities in accordance with the laws and regulations

11. 11 There are two basic values ​​ that are developed in the Act of 1945 regarding the implementation of decentralization and regional autonomy in Indonesia, namely: Unitarian value, which is manifested in the view that Indonesia does not have another unity government in which it is the state ("Eenheidstaat"), which means that sovereignty is inherent in the people, the nation and the Republic of Indonesia will not be divided between units of government. Territorial Decentralization basic values, of the letter and spirit of article 18 of Law 1945 and an explanation as mentioned above it is clear that the Government is obliged to carry out political decentralization and deconcentration in the constitutional field.

12. 12 The emphasis is on the regional autonomy of the district/city with some basic considerations: Political dimension, Level II Region has seen less fanaticism regional separatist movements so that risks and opportunities for the development of federalist aspirations relatively minimal; Administrative dimension, governance and service to society relative can more effectively; Level II area is the area "spearhead" the implementation of development so that the Regional Level II who better know the needs and potential of the people in the region

13. 13 On this basis, the principles of autonomy are: Real, according to the situation and the objective conditions in the area; Responsible, aligned/strived to accelerate development in the entire country. Dynamic, being the means and the drive for better and advanced.

14. 14 AUTONOMY IN THE FIELD OF FINANCIAL Autonomous Regions Areas that are entitled and obliged to regulate manage his own household One is the financial management Local Government. Implementation of local government functions will be implemented optimally if the host government affairs followed by search revenue sources sufficient to regions With reference to the law on fiscal balance between the central government and local governments in the amount adjusted and harmonized with the division of authority between the central government and local governments.

15. 15 The financial relationship between the state and local finance can be described as follows: President as head of government holds power state management that are part of government power; The President then hands over power to the regional head (governor/regent/mayor) as the head of local government to manage the finances of regional and local governments in the ownership represent separate assets; The relationship between central and regional management concerning the relationship of income (revenue) and utilization (expenditure) either for routine expenses as well as regional development in order to provide quality public services, responsibel and accountable; The concept of the relationship between central and local administration is the relationship and regional relations. The relationship is arranged through the central government's obligation to allocate equalization funds to local governments. Thus, all the financial resources attached to any matters submitted to a source area of local finance.

16. 16 From the explanations above, it can be seen that the relationship between the central government and local governments in financial management can be viewed from three aspects: In a judicial review. State Financial Management in Indonesia based on Act No. 17 of 2003 and in this law has expressly stated that one of the country's financial scope is local finance. As the implementation of this then stipulated Government Regulation No. 58 Year 2005 on Regional Financial Management. Legally, it can be said that the relationship between the central and the local government in terms of financial management is the implementation of financial management are based on Government Regulation No. 58 of 2005 as the implementation of Act No. 17 of 2003. In Overview System of Government. President is the head of government as well as the financial management of state authority. With the issuance of Act No. 32 of 2004, the president delegates the authority to the head of the region as the head of the regional administration and one of the authorities that are delegated authority in the area of financial management. In the Forms Overview State. Indonesia is a unitary state. Its firmness constitution is not negotiable. In the conception of the unitary state, there is no separation between the central government and local governments. Delegation of authority to local governments does not mean the central government does not supervise the implementation of the regional administration. One of the supervisions is in the area of financial management. Regional autonomy is implemented as long as it’s remained within the framework of a unitary state so that the central and local relations in this conception is a supervisory relationship.

17. 17 FISCAL REFORM ON LOCAL GOVERNMENT. History of Taxes in Indonesia Taxes in Indonesia is preceded by Land and Building Tax (PBB). In the past, PBB was better known as the land tax. The levy is applied to land or land owned by the people of Indonesia. Withholding tax on this land began VOC impose land tax called landrete. The people forced to pay a sum of money from the amount of land prices or the results of its land Selanjutnya di zaman Gubernur Jenderal Daendels, pemerintahan colonial mengklaim bahwa seluruh tanah Indonesia adalah milik Belanda. Saat itu ia menyebutnya Hindia Belanda. Ia menarik pajak yang tinggi termasuk dalam bentuk kerjapaksa. Yang diantaranya dipergunakan untuk membangun jalan raya Anyer-Panarukan. Furthermore, in the days of Governor General Daendels, colonial administration claimed that all the land in Indonesia is owned by the Dutch. At that time it was called as The Dutch East Indies. He draws high taxes included in the form kerjapaksa. Which are used specifically for building highway Anyer-Panarukan. At the time of British settlement, landrete policy change. Governor General Raffles charge a tariff of 2.5% for the indigenous groups and the tariff of 5% for land owned by other nations. When the Dutch returned to power, came the idea to impose income taxes. In the years 1920-1921 has no income tax on crops or crops resident. the term known as Warde versponding the form of taxes to the tea gardens, coconut, tea, and tobacco. The imposition of tariffs of 7.5% of the crop. In 1934 published the motor vehicle tax, after the birth of other taxes until the time of independence until now

18. 18 Fiscal decentralization through revenue sharing between the center and regions in accordance with the principle money follows function Efforts to support the financing of various affairs and the authority that has been delegated to the regions is one of the implementations of the paradigm of central and local government relations. Initial policy formulated in Law 22 and No. 25, 1999, among others, is characterized by the allocation of the General Allocation Fund (DAU) as a source of financing various government functions that have didaerahkan, DBH (DBH) of extraction of natural resources in the area concerned, and given the tax authority are limited to government area Decentralization laws were conducted in 2004 focused the monitoring mechanism by the central government, and improvements to the accountability of local government spending FISCAL REFORM IN CURRENT LOCAL GOVERNMENT

19. 19 Law Number 33 Year 2004 concerning Financial Balance of the Central Government and the Regions Enlarge the basis for tax revenue from natural resources owned by the region, as well as of other national-level taxes, and the expansion of the total funds that become a source of DAU Changes in the fiscal decentralization policy itself is a reflection of the growing fiscal needs at the local level, the practice of soft budget constraint of the central government were also caused by the slow pace of reform of local taxes

20. 20 Tax as a revenue source is one of the most important instruments in fiscal decentralization, because it reflects how much the revenue authority is owned by a governmental level The tax is also an instrument for managing demand and supply of local public goods, instruments for measuring the transparency and accountability of local government to the public, and the instruments to influence consumer behavior/local public. Acceptance is also a reflection of how large an area is trusted and has the ability to manage their own sources of revenue to finance its

21. 21 PRIMARY FUNCTION TAX Budgetary functions related to the tax function as a tool to raise funds from the public which are then used to pay for administration and development activities. the regulatory function is a function of tax relating to oajak role in regulating the economy, resource allocation, redistribution of income, consumption and public investments

22. 22 In today's era of regional autonomy, the area is given greater authority to regulate and manage their own household. The aim, among others, is to get closer to public services, make it easier to monitor and control the use of funds from the budget. To create a healthy competition between regions and encourage innovation. In line with such authority

23. 23 Local governments are expected to be able to dig up financial resources, especially to meet the financing needs of government and local development through Local Revenue (PAD). Increased responsibility of governance (the provision of public goods and economic development) at the level of a very large area, especially in the field of education which is an essential element in regional development. Region's ability to maintain and improve the organization can be said to be very limited, given the role of Local Revenue (PAD) in particular areas of tax issues is still low in the reception area budget city / county and the readiness of the human resources (HR) and the ability of management at the regional level is still very limited

24. 24 READINESS OF LOCAL GOVERNMENT FISCAL REFORMS ANTICIPATE STRENGTHENING OF TAXATION SYSTEM. STRENGTHENING OF LOCAL GOVERNMENT ACCOUNTING SYSTEM ACCRUAL

25. 25 STRENGTHENING OF TAXATION SYSTEM. Since regional autonomy was rolled out in 2001, the area has been given the freedom to pick and manage their own sources of revenue from the region. Law No. 34 of 2000 on Local Taxes and Levies, the area was given the authority to levy 11 (eleven) types of tax, which is 4 (four) types Provincial Tax and 7 (seven) types of tax Regency / City in accordance with the maximum tax rate set out in the legislation. In addition, the district / city is still given the authority to establish other types of tax insofar as it meets the criteria set out in the legislation and establishes types of levies other than those specified in government regulations

26. 26 Yet effective way to increase revenue in order to fund the implementation of regional autonomy. It is particularly indicated: The absence of significant changes to the composition of local revenues. Taxes and levies tend counterproductive to the regional economy. Regions in delivering the low compliance regulation Regional Tax and Retribution to the Central Government. The limited tax base in the district / city setting powers of taxation and levies that existed at that time was less support the implementation of regional autonomy

27. 27 Law No. 28 of 2009 on Local Taxes and Levies. In the Act has regulated the new provisions relating to: Broadening the tax base and levy which can be managed by the region The maximum and minimum limits of the provisions in the imposition of local tax rates. Tax Base smoking on cigarette tax.Addition of levies other than those specified in the legislation.Earmarking policies for certain types of local taxes. Changes in the mechanism of supervision over local charges from repressive system into a system of preventive and corrective.

28. 28 STRENGTHENING OF LOCAL GOVERNMENT WITH ACCRUAL ACCOUNTING SYSTEM. Reform era Transparency and accountability in financial management Government Regulation No. 71 Year 2010 concerning Governmental Accounting Standards (SAP). There is a change from the cash basis to accrual basis accounting into administration Application of the rule in the international accounting that has been referred to the Internatonal Public Sector Accounting Standards (IPSAS) issued by the International Federation of Accountants (IFAC). Regulation of the Minister of Home Affairs Number 64 Year 2013 on "Implementation of SAP Accrual Based on local government

29. 29 As the mandate of the regulation, in the scope of local government has issued Minister Regulation No. 64 Year 2013 on "Implementation of SAP Accrual Based on local government". Excess accrual accounting, among others, present information that is more complete and fulfilling managerial supervision functions. Factors of readiness of the local government, will be very important in implementing accrual accounting which should be implemented since 2015, to the head of the region need to be made regulations regarding accounting policies, accounting systems and a standard chart of accounts (BAS). With the application of accrual-based SAP is expected to be a lack of transparency, participation and accountability of financial management in order to realize good governance.

30. 30 CLOSING. Noting the problems mentioned above,it can be concluded that: Local governments need to do a precaution against changes in fiscal reform is the policy of the central government. In anticipation of the fiscal reforms, it is necessary to strengthen the local government system of local taxation. Precaution that needs to be done is to improve the government’s accounting system including improving the system of accrual-based asset management area. IPDN is an educational institution in charge of preparing cadres of local government leaders to prepare for a better future, for that we are ready to work together to meet the needs of local governments for financial management including anticipation of fiscal reform.