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Frida Rahayu; Yogiana Rismayati
Journal of Law, Public Policy and Public Finance (2026)
Studies of tax assignment reform usually evaluate the tier that surrenders a revenue instrument. The distribution of transferred revenue among receiving jurisdictions, and the vulnerability that receiving it creates, are rarely examined together. This article does so for Indonesia's surcharge (opsen), introduced by Law No. 1 of 2022 and effective from 5 January 2025, which reassigned 66 per cent of motor vehicle tax and vehicle transfer duty from provinces to regencies and cities. Using reported revenue for all 35 jurisdictions of Central Java Province for fiscal years 2024 and 2025, three results follow. First, the reform was strongly equalizing: the Gini coefficient of local tax revenue fell from 0.4361 to 0.3858, and would have risen to 0.4481 without the surcharge. Second, equalization was purchased at the price of concentrated exposure: mean dependence reached 37.0 per cent of local tax revenue, to a maximum of 67.4 per cent, and dependence is inversely related to pre-reform tax capacity (r = −0.50), so the fiscally weakest jurisdictions became the most reliant on revenue they neither assess nor collect. Third, the aggregate increase of 43.9 per cent conceals contraction: in 18 of 35 jurisdictions, revenue from locally administered tax bases fell in absolute terms. The article argues that assignability — the vulnerability of a revenue entitlement to unilateral statutory change by a higher tier — transfers downward with the revenue, and that reforms judged only on distributional criteria understate the risk they create.