Examining Flypaper Effect in Indonesia: Evidence After Transferring Urban-Rural Land and Building Tax to Locals Government

In order to increase the tax power of local governments, central government implemented a major reform in 2010 by transferring Urban-Country Land and Buildings Tax (PBB-P2) governments. Although contributes significant portion revenues, spending behavior governments is questionable, it unclear whether public has been increased. This study examines effect strengthening PBB-P2 policy on increasing revenue (PAD) its impact regional patterns, specifically there are still flypapers after reform. Applying fixed-effects panel data method Indonesian from 2005 2020, we found that had positive PAD. The was be one year (year +1) implementation each region, including for province, district, city, with issuance ordinances related PBB-P2. Interestingly, PAD impacted patterns. Thus, flypaper phenomenon did not exist 2020. implies can selectively empower levy appropriate taxes user fees. done providing new sources, restructuring types, simplifying usage fee harmonizing regulations government.