POLICY PAPER: Regional Revenue Reform to Encourage Fiscal Independence: An Analysis of PAD, DTU Dependency, and Structural Strategy 2018–2024 Palopo City

Abstract

This policy paper analyzes regional revenue reform in encouraging the fiscal independence of Palopo City for the 2018–2024 period. This study is motivated by the high fiscal dependence on the General Transfer Fund (DTU) amid the trend of moderation and declining allocation from the central government, while the contribution of Regional Original Revenue (PAD) has not been able to shift the fiscal structure significantly. In nominal terms, PAD increased from IDR 139.28 billion (2018) to IDR 205.56 billion (2024), but its average contribution to total revenue was only 17.95%, while DTU still dominated around 77.83%. The fiscal independence ratio improved from 1:5.36 to 1:3.45 but is still in the low category. The structure of PAD is also not ideal because it is dominated by other legitimate PAD (±58%), while regional taxes as the main instrument of the urban economy only contribute ±23%. This study uses a descriptive-analytical approach based on secondary data from regional planning documents and financial statements. The findings show that the main problem is not only the low nominal PAD, but also the lack of an integrated, compliance-based, and supported revenue system that is integrated and supported by strong regulations and supervision. Palopo City faces a triple fiscal challenge: high dependence on DTUs, weak PAD capacity as a fiscal support, and a downward trend in central transfers. This policy paper recommends structural reform through three main pillars: strengthening regional revenue regulations, modernizing the implementation and administration of technology-based voting, and strengthening the supervision and compliance system. This reform is expected to be able to encourage sustainable fiscal transformation and support the target of significantly increasing PAD in the next five years.