Unraveling the Ratio Legis of the HKPD Law on Local Taxes and its Implications for the Community

Abstract

Law No. 1 of 2022 on Financial Relations between the Central Government and Local Governments (HKPD Law) comes as a response to the challenges of implementing fiscal decentralization in Indonesia, particularly in local taxes and levies. This article analyzes the ratio legis behind the birth of the HKPD Law and its implications for society. This research uses a normative approach by examining regulations and Constitutional Court decisions relating to local taxes. The results show that the HKPD Law aims to improve local taxation regulations by strengthening the tax structure, simplifying retribution, and increasing the effectiveness and efficiency of local tax collection. However, this policy also raises potential challenges, such as the impact on the business world, community welfare, and harmonization with other tax policies. Therefore, the implementation of the HKPD Law needs to be closely monitored to achieve the main objectives of fiscal decentralization, namely improving public services and community welfare equally.