Tax Revenue and Income Inequality

A Provincial Level Evidence


  • Damayanti Sari Department of Economics, Faculty of Economics and Business, University of Indonesia
  • Riatu Mariatul Qibthiyyah Director. Institute for Economic and Social Research, University of Indonesia



tax revenue, income inequality, income tax, value-added tax, local tax


This study examines the relationship between tax revenues and income inequality at the provincial level in Indonesia from 2011 to 2019. Applying a fixed-effect approach, this study finds that total tax revenue has no significant effect on income inequality. This result implies that Indonesia's current tax system and structure, both national and sub-national, have been unable to contribute to reducing provincial income inequality. Likewise, by the type of taxes, both income tax and value-added tax revenue have a relatively insignificant effect. However, the ratio of local taxes to gross regional domestic product (GRDP) has a considerable positive effect on income inequality, indicating that the majority of consumption taxes in the local tax component are regressive. Accordingly, at the sub-national level, expenditure programs may play role in reducing provincial inequality instead of the tax system.


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How to Cite

Sari, D., & Qibthiyyah, R. M. (2022). Tax Revenue and Income Inequality: A Provincial Level Evidence. Jurnal Perencanaan Pembangunan: The Indonesian Journal of Development Planning, 6(2), 155–172.