Limited Regional Potential

Oct 13, 2025 by leolavanderia.com.br 5 views

The Effect of Local Taxes, Regional Levies, General Allocation Funds, and Profit Sharing Funds on Capital Expenditure in the Highlands of North Sumatra Province

Introduction

The highlands of North Sumatra Province are a region with limited economic potential compared to lowland areas. As a result, local tax revenue and regional levies tend to be low, making it challenging for the region to fund its development projects. In this context, the role of general allocation funds (DAU) and profit sharing funds (DBH) becomes crucial in supporting infrastructure development and fixed assets in the region. This study aims to investigate the effect of local taxes, regional levies, DAU, and DBH on capital expenditure in the highlands of North Sumatra Province.

Methodology

This study uses a descriptive approach and quantitative methods to analyze secondary data obtained from the official website of the Directorate General of State Assets. The data is processed using the EViews program version 12. The study focuses on the highlands of North Sumatra Province, which is a region with limited economic potential.

Results

The results of this study show that simultaneously, independent variables such as local taxes, regional levies, DAU, and DBH have a significant influence on the dependent variable, namely capital expenditure. However, partial analysis reveals interesting results.

Regional Tax, Regional Levies, and DBH: A Negative and Insignificant Influence

The results show that regional tax, regional levies, and DBH turned out to have a negative and insignificant influence on capital expenditure. This means that an increase in revenue from the three sources is not directly proportional to the increase in capital expenditure in the North Sumatra highlands. This finding is consistent with the limited economic potential of the region, which makes it challenging for local tax revenue and regional levies to fund development projects.

DAU: A Positive and Significant Influence

On the other hand, DAU is proven to have a positive and significant influence on capital expenditure. This shows that DAU is a vital source of funding in supporting infrastructure development and fixed assets in the region. DAU is often directed to fund strategic infrastructure projects that have a major impact on regional development, such as roads, bridges, and irrigation.

The Importance of DAU in Encouraging Development in the North Sumatra Highlands

This finding reveals the importance of the role of DAU in encouraging development in the North Sumatra highlands. Several factors contribute to this finding:

Limited Regional Potential: The highlands generally have more limited economic potential compared to lowland areas. This causes local tax revenue and regional levies tend to be low.
Dependence on the Central Allocation: The central government has an important role in helping regions that have limited economic potential. DAU is an effective transfer mechanism for helping the region to improve the quality of infrastructure and public services.
Development Priorities: DAU is often directed to fund strategic infrastructure projects that have a major impact on regional development, such as roads, bridges, and irrigation.

Recommendations for Local Governments

This study provides recommendations for local governments to increase the effectiveness of the use of DAU in supporting development in the highlands of North Sumatra.

Strengthening Planning and Budgeting: Local government needs to prepare an integrated plan and budget and focused on development priorities.
Increasing Transparency and Accountability: Increasing transparency and accountability in the management of DAU will encourage the use of funds that are more effective and efficient.
Encouraging Partnerships with Private Parties: Regional governments can involve the private sector in funding and implementing development projects to increase effectiveness and efficiency.

Conclusion

With the right strategy, DAU can be a catalyst in encouraging economic development and improving the welfare of the people in the highlands of North Sumatra. This study highlights the importance of DAU in supporting infrastructure development and fixed assets in the region. Local governments can increase the effectiveness of DAU by strengthening planning and budgeting, increasing transparency and accountability, and encouraging partnerships with private parties.

Limitations of the Study

This study has several limitations. Firstly, the study only focuses on the highlands of North Sumatra Province, which may not be representative of other regions in Indonesia. Secondly, the study uses secondary data, which may not be up-to-date or accurate. Finally, the study only analyzes the effect of DAU and DBH on capital expenditure, and does not consider other factors that may influence development in the region.

Future Research Directions

Future research can build on this study by:

Investigating the Effect of DAU and DBH on Other Development Outcomes: This study only focuses on capital expenditure, but DAU and DBH may also have an impact on other development outcomes, such as poverty reduction, education, and health.
Analyzing the Effect of DAU and DBH in Other Regions: This study only focuses on the highlands of North Sumatra Province, but DAU and DBH may have a different impact in other regions with different economic and social characteristics.
Examining the Role of Other Factors in Influencing Development in the Region: This study only considers the effect of DAU and DBH, but other factors, such as local tax revenue, regional levies, and private sector investment, may also play a role in influencing development in the region.
Frequently Asked Questions (FAQs) about the Effect of Local Taxes, Regional Levies, General Allocation Funds, and Profit Sharing Funds on Capital Expenditure in the Highlands of North Sumatra Province

Q: What is the main finding of this study?

A: The main finding of this study is that general allocation funds (DAU) have a positive and significant influence on capital expenditure in the highlands of North Sumatra Province, while regional tax, regional levies, and profit sharing funds (DBH) have a negative and insignificant influence.

Q: Why is DAU important for the highlands of North Sumatra Province?

A: DAU is important for the highlands of North Sumatra Province because it provides a vital source of funding for infrastructure development and fixed assets in the region. DAU is often directed to fund strategic infrastructure projects that have a major impact on regional development, such as roads, bridges, and irrigation.

Q: What are the limitations of this study?

A: The limitations of this study include:

The study only focuses on the highlands of North Sumatra Province, which may not be representative of other regions in Indonesia.
The study uses secondary data, which may not be up-to-date or accurate.
The study only analyzes the effect of DAU and DBH on capital expenditure, and does not consider other factors that may influence development in the region.

Q: What are the recommendations for local governments to increase the effectiveness of DAU in supporting development in the highlands of North Sumatra Province?

A: The recommendations for local governments to increase the effectiveness of DAU in supporting development in the highlands of North Sumatra Province include:

Strengthening planning and budgeting to prepare an integrated plan and budget and focused on development priorities.
Increasing transparency and accountability in the management of DAU to encourage the use of funds that are more effective and efficient.
Encouraging partnerships with private parties to involve the private sector in funding and implementing development projects to increase effectiveness and efficiency.

Q: What are the implications of this study for policy makers and practitioners?

A: The implications of this study for policy makers and practitioners include:

Recognizing the importance of DAU in supporting infrastructure development and fixed assets in the highlands of North Sumatra Province.
Strengthening planning and budgeting to ensure that DAU is used effectively and efficiently.
Encouraging partnerships with private parties to increase the effectiveness and efficiency of development projects.

Q: What are the future research directions based on this study?

A: The future research directions based on this study include:

Investigating the effect of DAU and DBH on other development outcomes, such as poverty reduction, education, and health.
Analyzing the effect of DAU and DBH in other regions with different economic and social characteristics.
Examining the role of other factors in influencing development in the region, such as local tax revenue, regional levies, and private sector investment.

Q: What are the potential applications of this study?

A: The potential applications of this study include:

Informing policy decisions related to the allocation of DAU and DBH in the highlands of North Sumatra Province.
Guiding the development of strategies to increase the effectiveness and efficiency of DAU and DBH in supporting development in the region.
Providing insights for local governments and private sector organizations on how to work together to achieve development goals in the highlands of North Sumatra Province.