The effect of organizational structure on budgetary slack in local tax collection offices in indonesia

Abstract

The low fiscal capacity of the Indonesian local governments makes their finance more dependent on transfer funds, while the efforts to increase local tax income (in Indonesia up to 72% of the PAD proportion is from local tax income) have not been optimal. The motif triggers us to analyze organizational structure as a variable affecting budgetary slack, and whether it becomes an obstacle to local tax offices in Indonesia. Thus, it is expected that local tax performance can be optimal, and the objective of this study is to get the best structure organization that fit for the best performance to achieve. Data was collected by distributing questionnaires to all 120 include provincial and district tax collection offices in Indonesia. The data was then analyzed using the Structural Equation Model (SEM). The result revealed that organizational structure influences budgetary slack in local tax offices. This study is one of the first to discuss organizational structure and its relation to budgetary slack to optimize local tax performance. It is also the first study that was conducted in Indonesian local governments, in which the nature of local taxes differs from central taxes.