Evaluating the Motor Vehicle Tax Collection System

Motor vehicle tax (PKB) is an important source of Own-Source Revenue (PAD) for provincial governments. The amount collected is influenced, among other things, by the number of vehicles registered in a region.

Regions with large populations and vehicle fleets have relatively broad tax bases. However, as vehicles become easier to move between regions, a fundamental question arises: is a collection system based entirely on registration location still relevant to current patterns of mobility?

That question is increasingly important as some regions face pressure on motor vehicle tax revenues. In Central Java, for example, audited 2025 financial statements recorded PKB receipts of about Rp3.96 trillion, down from Rp5.47 trillion in 2024.

At the same time, PKB arrears in 2025 stood at about Rp2.44 trillion, below the Rp2.90 trillion recorded the previous year. The decline in arrears should be considered in light of the write-off of receivables, and does not necessarily indicate improved payment compliance.

Lower PKB revenue can be caused by various factors, from changes in new vehicle sales and tax policy to household finances and compliance with annual tax payments.

Incentives for electric vehicles can also affect the amount collected, although their impact needs to be assessed alongside changes in vehicle numbers and the policies in force. Revenue contraction, therefore, cannot be explained by a single factor.

Beyond these factors, a structural issue merits attention: vehicle tax collection administration still relies heavily on where a vehicle is registered. Yet registration location does not always reflect where a vehicle is used day to day. This mismatch should be reviewed, particularly as people and vehicles become more mobile.

When Vehicles Move Beyond Administrative Boundaries

Annual vehicle tax obligations differ from charges incurred when someone buys a new vehicle. In a new vehicle transaction, various administrative obligations are generally settled during the purchase and registration process.

Annual tax, by contrast, is a recurring obligation that vehicle owners must meet. When household finances deteriorate, that payment may compete with other needs considered more urgent.

A further issue arises in second-hand vehicle transactions. The obligations and administrative costs associated with transferring ownership or moving a vehicle’s registration can add to the buyer’s expenses. Local policies that waive or reduce certain fees may help, but do not necessarily resolve all administrative difficulties. Some people continue using a vehicle they have bought without promptly updating its registration details.

Population mobility complicates matters further. Statistics Indonesia (BPS) uses the term “recent migrant” for a person whose current province of residence differs from the province where they lived five years earlier. Data on households with recent migrants can indicate that a change of residence may be accompanied by the transfer of assets, including motor vehicles. A vehicle already owned in the place of origin may not be immediately replaced with a new one after a family moves.

Although the proportion of households with recent migrants is relatively small—about 2.3%, according to the data considered in this discussion—such mobility remains relevant to the design of tax administration.

That figure is not a direct measure of vehicle movements, but it points to household relocation that could affect where assets are used. Buying a new vehicle in the destination region may not be a priority if a family already has one from its place of origin.

Commuting presents a different challenge. Someone might live in Bogor and use one motorbike to reach a local station, then continue the journey by KRL commuter train.

At their destination, they use another motorbike, parked near the station, to get to work. On the return journey, the second vehicle is left at the destination station, while the trip home continues by KRL and the first motorbike.

In this pattern, one person’s two vehicles are routinely used in different regions, without any change of residence. It shows that an owner’s residence, a vehicle’s registration location and its place of use can all be different.

This situation does not automatically indicate a tax offence. However, if all administration and revenue allocation depend solely on registration location, the system may fail to reflect actual vehicle mobility. The issue is not simply whether a vehicle is legally registered, but whether the administrative system can accommodate patterns of use that cross regional boundaries.

Integrating Collection and Revenue-Sharing

The solution to consider is not simply raising tax rates or expanding enforcement. Local governments should begin building a nationally integrated PKB collection system. This need not mean transferring local tax powers to central government. Provincial governments would retain their powers under the applicable rules, while administrative and payment systems across regions would be connected.

The first step would be to allow vehicle tax to be paid from anywhere, without requiring taxpayers always to visit a tax office in the vehicle’s registration region. For example, a vehicle registered in Central Java could have its tax paid at a service office in another province. The payment would still be recorded in a system linked to the vehicle’s data and the local government entitled to receive the revenue.

This convenience matters because the location of a service office should not obstruct the fulfilment of tax obligations. Integration could also reduce the time and travel costs involved, particularly for people who live or work far from the region where their vehicles are registered.

The second step is to consider a revenue-sharing mechanism between the registration region and the region where a vehicle operates. Registration location has so far been the main basis for tax administration. In future, it should be assessed whether some revenue could also be allocated to the region where a vehicle is used regularly.

Where a vehicle is registered and operated in line with its owner’s residence, all PKB revenue would go to the relevant region. But where the registration location differs from the place of operation, a mechanism for sharing revenue between the two regions should be considered.

A 50:50 formula could serve as an initial illustration. Part of the tax calculation would be based on the registration region’s index, while the remainder would take account of the vehicle’s operating region. This is not a final formula to be applied uniformly. A fair allocation should be tested through simulations that consider vehicle characteristics, user mobility, administrative costs and each region’s contribution.

Determining where a vehicle operates presents a technical challenge. Not every vehicle passing through a region can be considered to operate there. A vehicle that passes through occasionally is different from one used every day to commute to work or conduct economic activity in another region. Clear operational definitions and verification mechanisms are therefore needed, without creating excessive administrative burdens.

Expanding Enforcement and Improving Data

An integrated system would also create opportunities to broaden enforcement against late tax payments. With connected data, officers could verify a vehicle’s tax status without relying on whether it is registered in their region.

Enforcement would still have to follow the relevant powers and legal procedures, but inter-regional coordination could reduce information gaps that non-compliant taxpayers might exploit.

Fiscal incentives could also be designed so that the local government where a vehicle operates receives a share of the tax revenue collected, even if the vehicle is registered elsewhere. This would encourage every region to help monitor vehicles and collect tax, regardless of where they were registered.

As a result, a region’s fiscal interests would no longer depend solely on vehicles registered within its own boundaries. Inter-regional involvement is expected to broaden collection, improve taxpayer compliance and curb tax avoidance through the exploitation of administrative boundaries.

Another important benefit would be more reliable data on asset ownership for tax purposes. In practice, a person may use someone else’s identity to register a motor vehicle.

For example, a Jakarta identity-card holder who buys a vehicle in Semarang might use a local resident’s National Identification Number (NIK) to register it there. The vehicle would then be registered under someone else’s identity, even though it is actually owned and used by the buyer.

Such nominee arrangements can create problems when vehicle data are matched against annual income tax returns. The Directorate General of Taxes (DJP) may find it difficult to identify a vehicle as part of a taxpayer’s assets if the NIK on the registration differs from the one used in their tax return.

Integrating vehicle and tax administration, alongside better verification of owner identities, could narrow this information gap. System integration would therefore benefit not only PKB collection, but also the accuracy of asset data in tax administration.

There are, of course, risks to consider. Revenue-sharing could alter the distribution of PAD between regions, particularly where tax rates and tax bases differ. Differences in rates could also prompt owners to register vehicles in lower-tax regions while continuing to operate them in the original region. If left unaddressed, this practice could shift the revenue base without any corresponding change in where vehicles are actually used.

Integration must therefore be accompanied by mechanisms to verify operating locations and prevent registration changes made solely to secure a lower tax burden. Cross-regional revenue flows would also require clear procedures for reconciliation, resolving discrepancies and oversight. Implementation should be preceded by fiscal simulations and pilots in areas with high levels of inter-regional vehicle mobility.

Why Must Administration Keep Pace with Asset Mobility?

From the perspective of accounting and asset management, motor vehicles differ fundamentally from land and buildings. Land and buildings are fixed assets tied to a specific physical location, whereas motor vehicles are movable goods that can travel according to their owners’ needs. This characteristic should be taken into account when designing vehicle tax administration.

It makes little sense for vehicle mobility to be addressed by requiring owners to change their administrative residence. Migrant workers and commuters who live in one region and work in another—whether they travel daily, weekly or monthly—should not have to change their identity cards merely to meet tax obligations in the relevant place.

Administrative systems should accommodate asset mobility without making a change of residence the main prerequisite. Cross-regional payment integration and revenue-sharing based on registration and operating locations offer a way to achieve this. Tax obligations would still be met, local government powers respected, and revenue allocated with regard to how vehicles are actually used.

This reform would not guarantee an immediate increase in revenue. Its results would depend on policy design, data quality, incentives between regions and enforcement. But retaining a fragmented system would mean allowing coordination problems and information gaps to persist.

In an era of increasingly sophisticated information technology, the question is no longer whether this can be done, but whether there is the will to try a new approach to optimising one of the main sources of PAD.