The Estimation of Central Government Revenues in Indonesia
Tandjung, Irzan
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https://hdl.handle.net/2142/70784
Description
Title
The Estimation of Central Government Revenues in Indonesia
Author(s)
Tandjung, Irzan
Issue Date
1987
Department of Study
Economics
Discipline
Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, General
Abstract
This study discusses how revenue estimation has been conducted in Indonesia. Then suggestion is made to improve upon this by using a relatively simple revenue forecasting model. Improvement in forecasting is one of many steps needed to increase receipts of the central government. This suggestion is made stronger by declining price movements in the world oil market since 1982. Indonesia is highly dependent on oil revenues in its budget. Its development efforts are heavily affected by these declining oil yields.
The Singer model is the revenue forecasting model suggested for Indonesia. The choice is made after the reality about revenue and other economic data in most developing countries such as Indonesia. In a data deficient country we cannot be too sophisticated; we have to use a simple but workable model such as the Singer model. This model needs only simple revenue data series and income figures which are available in the system. Although personal income is the appropriate tax base, this model allows adjustment to have GDP figures be used as a proxy tax base. To take into account discretionary policy measures that affect collection, dummy variables are introduced and used in the model.
The main finding is that with (i.e., a coefficient of elasticity of 0.93) or with (i.e., a coefficient of buoyancy of 1.03) taking discretionary actions into the model, Indonesia's performance could not parallel the comparable performances of other comparable developing countries. The main conclusion from this is that Indonesia has to work very hard to improve its collection yields.
The country itself has taken and is still doing many of these improvement efforts, including the 1984 tax reform. The most important of all these efforts is, of course, an efficient and effective enforcement of tax collection; and to give a good guide of what level of revenues needs to be achieved a simple but workable revenue forecasting model certainly can help.
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