# **Table 8. Williamson’s Index Determined Weights for Fiscal Capacity and Expenditure Need Factors in DAU allocations**

|**PROVINSI**|**DAU TAHUN**<br>**2006**|**DAU TAHUN**<br>**2007**|**DAU TAHUN**<br>**2008**|**DAU TAHUN**<br>**2009**|**DAU TAHUN**<br>**2010**|**DAU TAHUN**<br>**2011**|
|---|---|---|---|---|---|---|
|BOBOT VARIABEL DAU<br>**VARIABEL KEBUTUHAN FISKAL**<br>JUMLAH PENDUDUK|30.0%|30.00%|30.00%|30.00%|30.00%|30.0%|
|LUAS WILAYAH|15.0%|15.00%|15.00%|15.00%|15.00%|15.0%|
|INDEKS KEMAHALAN KONSTRUKSI|30.0%|30.00%|30.00%|30.00%|30.00%|30.0%|
|INVERS INDEKS PEMBANGUNAN MANUSIA|10.0%|10.00%|10.00%|10.00%|10.00%|10.0%|
|PDRB|15.0%|15.00%|15.00%|15.00%|15.00%|15.0%|
|**VARIABEL KAPASITAS FISKAL**<br>|||||||
|PAD|50.00%|50.00%|50.00%|50.00%|50.00%|50.00%|
|DBH PAJAK<br>|100.00%<br>|75.00%<br>|75.00%<br>|95.00%<br>|73.00%<br>|80.00%<br>|
|DBH SDA|100.00%|50.00%|41.25%|70.00%|95.00%|95.00%|
|**KABUPATEN / KOTA**|**DAU TAHUN**<br>**2006**|**DAU TAHUN**<br>**2007**|**DAU TAHUN**<br>**2008**|**DAU TAHUN**<br>**2009**|**DAU TAHUN**<br>**2010**|**DAU TAHUN**<br>**2011**|
|BOBOT VARIABEL DAU<br>**VARIABEL KEBUTUHAN FISKAL**|||||||
|INDEKS PENDUDUK|30.00%|30.00%|30.00%|30.00%|30.00%|30.00%|
|INDEKS WILAYAH|15.00%|15.00%|15.00%|15.00%|13.25%|13.50%|
|INDEKS IKK|30.00%|30.00%|30.00%|30.00%|30.00%|30.00%|
|INDEKS INVERS IPM|10.00%|10.00%|10.00%|10.00%|11.00%|10.00%|
|INDEKS INVERS PDRB|15.00%|15.00%|15.00%|15.00%|15.75%|16.50%|
|**VARIABEL KAPASITAS FISKAL**|||||||
|PAD|100.00%|75.00%|75.00%|70.00%|93.00%|93.00%|
|DBH PAJAK|100.00%|75.00%|75.00%|73.25%|100.00%|100.00%|
|DBH SDA|100.00%|50.00%|50.00%|100.00%|100.00%|63.00%|

Notes: Provinsi: Province; Variabel Kebutuhan Fiscal: Fiscal Need Variables;Jumlah Penduduk: population share; Luas Wilayah: area share ; Indeks Kemalhalan Konsruksi (IKK): Construction price index; Inverse Indeks Pembangunan Manusia (IPM): Inverse of Human Development Index; PDRB – Regional/local GDP ; Variabel Kapasitas Fiscal: Fiscal capacity variable; PAD – own source revenues ; DBH Pajak: revenue sharing from taxes; DBH SDA: Natural resources revenue sharing.

Source: Ministry of Finance, Government of Indonesia

# **DAU – An Evaluation**

In the interest of tax harmonization, limiting differentials in sub-national fiscal capacities and lowering tax administration costs, Indonesia has adopted a highly centralized tax system with the Central Government raising 95% of total revenues. This creates a large vertical fiscal gap (almost 90%) that is filled by revenue sharing and transfers. Revenue sharing by origin while reducing vertical fiscal gap accentuates horizontal fiscal inequalities. DAU is the foremost program to bridge horizontal inequities. It is an objective formula based transfer program that partially compensates for civil service wages and partially tries to limit the differentials the fiscal capacity across jurisdictions by focusing on reducing the variations in regional allocation of transfers as measured by the weighted coefficient of variation. This results in reducing overall inequality in fiscal capacities and some redistribution of income across provinces and cities and districts as shown by Eckardt and Shah (2007). However, the current program has a number of important limitations.

_One size fits all approach leads to fiscal inequity._ The foremost concern is that the program equalizes jurisdictions with widely dissimilar responsibilities and characteristics. This is especially true when you group metropolitan areas, cities of varying population sizes and rural municipalities 16