THE EFFECT OF TAX REVENUE ON ECONOMIC GROWTH IN INDONESIA 2019-2022
DOI:
https://doi.org/10.65886/ijde.v1i4.46Keywords:
Local Tax Revenue, Economic Growth, Consumer Price Index, Gini RatioAbstract
This study aims to analyse the effect of local tax revenue, Consumer Price Index (CPI), and Gini Ratio on the economic growth of provinces in Indonesia during the 2019-2022 period. The background of this research is based on differences in development outcomes between regions, even though most regions have experienced an increase in tax revenue. This phenomenon raises questions about the effectiveness of tax revenue in promoting equitable economic growth, especially in the midst of economic pressures due to the COVID-19 pandemic. This study uses a quantitative approach with a panel data regression method. Data were obtained from 34 provinces with a total of 136 observations and analysed using STATA software. The model used is random effects, which is selected based on Chow, Hausman, and LM tests. The results showed that local tax revenue has a positive and significant effect on economic growth. Meanwhile, CPI has a negative but statistically insignificant effect, and Gini Ratio shows no significant effect. This finding confirms that local fiscal capacity plays an important role in supporting economic development, while price pressures and inequality have not had a dominant impact in the observation period. The implication of this study is the need to optimise local tax revenue and manage it to productive sectors. In addition, tax reforms and regional fiscal policies need to be directed towards promoting inclusive and equitable growth
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