Implementing Vertical Fiscal Policy in Jambi: Strategic Planning and Sustainable Development for Regencies and Cities

Abstract

In Jambi Province, fiscal imbalances between regencies and cities necessitate a comprehensive approach to ensure equity and efficiency in resource allocation. This study aims to analyze the implementation of vertical fiscal policy in Jambi, focusing on disparities in fiscal capacity and the role of fiscal transfers, such as General Allocation Funds (DAU), Specific Allocation Funds (DAK), and Revenue Sharing Funds (DBH). The objective is to assess fiscal independence and recommend strategies to strengthen local taxing power. The study employs a mixed-method approach, combining quantitative analysis of the Vertical Fiscal Imbalance Coefficient (CVI) from 2018 to 2023 and qualitative insights from interviews with local government officials. The findings reveal Batanghari Regency maintained stable CVI values, reflecting fiscal autonomy, while Tanjung Jabung Barat saw a decline in CVI, indicating increased dependence on central government support. Muaro Jambi demonstrated significant improvement in fiscal independence, while Tanjung Jabung Timur consistently exhibited low fiscal dependence due to strong local revenue sources. Merangin experienced fluctuations, suggesting fiscal instability. Jambi City, Kerinci, and Sungai Penuh displayed varying levels of fiscal independence, with Jambi City showing stable revenue sources, Kerinci relying on stable transfer funds, and Sungai Penuh demonstrating fiscal resilience despite fluctuations. The findings emphasize the importance of strengthening locally generated revenue (PAD) and improving fiscal management to reduce reliance on central government transfers and enhance sustainable fiscal autonomy in the region. To reduce fiscal disparities, the study recommends enhancing local taxing power as stipulated by Law No. 1 of 2022 on Central and Regional Financial Relations (HKPD). Key strategies include forming a task force to address tax and levy management, conducting public socialization in remote areas, establishing a structured evaluation timeline, ensuring regulatory alignment with existing laws, diversifying regional income through economic sector development, improving communication between taxpayers and tax officials, fostering cooperation between central and local governments, and enhancing tax and regional infrastructure to build public trust and support tax official development.