Regional Autonomy, Limited Innovation, Tax Increases as a Shortcut

JAKARTA, KOMPAS.com - After the central government cut balancing funds and the regional transfer funds (TKD) in the last two years, a new phenomenon has appeared in the regions: a craze for tax hikes. The most high-profile case involved the Land and Building Tax (PBB) in Pati Regency, Central Java, which suddenly surged by as much as 250 percent. As a result, residents were furious and staged large-scale protests to force the Pati Regent, Sudewo, to withdraw the policy. However, the Pati incident did not appear to provide lessons for other regional heads. The Home Affairs Minister Tito Karnavian issued Circular Number 900.1.13.1/452B/SJ on 14 August 2025, relating to adjustments in the determination of local tax and local retribution policies, addressed to all governors, regents, and mayors. In item a2 of the circular, governors and regents/mayors were urged that, in setting policies on the levying of local taxes and local retribution, they should take into account the circumstances of the community to avoid imposing burdens, particularly on low-income groups. However, the tax policy is far from over. Recently, the motor vehicle excise levy (opsen) has been deemed burdensome by Central Java residents. Motor vehicle excise (opsen) is an additional levy collected by district/city authorities under statutory provisions. Revenue from these levies is used for regional interests, including increasing local revenue, improving infrastructure, enhancing public services, and stimulating economic growth. Residents in Central Java have cried out, and a movement to stop paying vehicle tax has emerged. The pattern repeated itself, not to scrap the opsen, but to provide a 5 percent relief.