Improving Land Productivity through Fiscal Policy: A Framework for Analysis

The report analyzes Indonesia's land-use revenue systems, finding that 93.5% of revenue is based on production rather than land size, which fails to disincentivize land expansion. It identifies high-potential areas for reform, including the Land and Building Tax, Forestry Non-Tax Revenue, and the use of Adjustment Funds for earmarking sustainable land use activities. The analysis also highlights how current central-to-regional revenue sharing may perversely encourage local governments to grant more land permits to increase their budgets.

• Indonesia's land-use revenue system is heavily skewed toward production-based levies, with USD 38.6 billion, or 93.5% of all land use revenue, coming from instruments based on profitability rather than land size.
• Instruments based on land area, which provide penalties for land expansion, contribute only 6.5% of total revenue; these include the Land & Building Tax, Forestry non-tax revenue, National Land Registry non-tax revenue, and Mining and Geothermal fixed fees.
• The Land and Building Tax is identified as having high potential for improvement because it is based on land size and its valuation component (NJOP) is determined by Ministerial Decree, making it relatively easy to reform to reflect market values.
• Forestry Non-Tax Revenue is highlighted as a high-potential area for optimization due to its low realization rate of 72% and the fact that three of its seven calculation types are based on land size.
• Current revenue-sharing mechanisms may incentivize regional governments to grant more land permits because a large portion of transfers from Land & Building Tax, Forestry Non-Tax, and Mining Non-Tax instruments are calculated based on land size.
• The General Allocation Fund (GAF) may perversely discourage regional governments from increasing their own production-based natural resource revenues because higher fiscal capacity leads to lower GAF allocations.
• Adjustment Funds offer the highest potential for earmarking toward sustainable land use because they have no fixed allocation formula and are less regulated than the Special Allocation Fund.

APA

Mafira, T., & Sutiyono, G. (2015). Improving Land Productivity through Fiscal Policy: A Framework for Analysis. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2015/12/Full-Report-English-Improving-Land-Productivity-Through-Fiscal-Policy-A-Framework-for-Analysis.pdf

Chicago

Mafira, Tiza, and Guntur Sutiyono. Improving Land Productivity through Fiscal Policy: A Framework for Analysis. Climate Policy Initiative, 2015. https://www.climatepolicyinitiative.org/wp-content/uploads/2015/12/Full-Report-English-Improving-Land-Productivity-Through-Fiscal-Policy-A-Framework-for-Analysis.pdf.

Wikipedia

{{cite report |last1=Mafira |first1=Tiza |last2=Sutiyono |first2=Guntur |title=Improving Land Productivity through Fiscal Policy: A Framework for Analysis |publisher=Climate Policy Initiative |date=December 2015 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2015/12/Full-Report-English-Improving-Land-Productivity-Through-Fiscal-Policy-A-Framework-for-Analysis.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{mafira2015improving, author = {Mafira, Tiza and Sutiyono, Guntur}, title = {{Improving Land Productivity through Fiscal Policy: A Framework for Analysis}}, institution = {Climate Policy Initiative}, year = {2015}, month = dec, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2015/12/Full-Report-English-Improving-Land-Productivity-Through-Fiscal-Policy-A-Framework-for-Analysis.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }