Enhancing Local Own-Revenues -- Problems and Challenges

Abstract

Fiscal decentralization demand the regions to improve their creativity in collecting funds for financing local expenditures according to their needs (self-financing). The objective of this paper is to identify problems and challenges in enhancing local own-revenues faced by the local governments. This research used the qualitative method by comparing two case studies on the enhancement of local own-revenues. Both the local governments of A and B face problems in optimizing local ownrevenues. the enhancement of local own-revenues is faced with two main challenges. For undeveloped regions, the challenge is the making of an urban-biased policy and for regions with urban characteristics the challenge is the emergence of urban problems due to high business opportunities in the urban regions. Another challenge faced by every local government is dependency on the sector of local taxes as the sector with large contribution to local own-revenues.