Implications of the HKPD Law: Is it Beneficial for Local Governments?

Abstract

Purpose: Implementing Law No 1 of 2022 on Financial Relations Between The Central and Regional Governments (HKPD Law), has implications for regional governments, to amend their respective Regional Regulations. However, is the implementation of the HKPD Law really beneficial for the fiscal capacity of regional governments? This research aims to analyze the comparative policies in regional regulations, before and after the implementation of the HKPD Law.

Methodology/approach: This research uses descriptive analytical. Data collecting through documentation, by analyzing several district head or mayor regulations that have changed, before and after the implementation of the HKPD Law.

Results/findings: This study found that there were differences in the realization of regional taxes and regional retribution before and after the enactment of the HKPD Law and Regional Regulations, which had an effect on the Provincial Gross Domestic Product (GDP). However, for the fiscal budget before and after the enactment of the HKPD Law, although there were differences in the tax budget before and after the enactment of this regulation, for retribution, there was no difference in the value of the retribution budget before and after the enactment of the HKPD Law and Regional Regulations.

Limitations: The data realization of regional taxes and regional retribution that have been processed are only limited to data up to October 2024. In addition, the effect on Gross Domestic Product cannot be assessed with certainty, because this regulation only came into effect this year.

Contribution: This research is a policy analysis, it is hoped that it will be useful for local governments.

Novelty: using policy analysis, by estimating its effects on future fiscal capacity