LOCAL-TAX SERVICE REFORM IN CILEGON CITY, BANTEN
SERVICE REVENUE AND FINANCIAL MANAJEMEN AREA OF CILEGON CITY

A. Problem Analysis

 1. What was the problem before the implementation of the initiative?
Several problems faced by the government of Cilegon City prior to the implementation of the innovation are as follow: 1. In 2011, the quality of the local-tax service was far from the public expectation, indicated by 5-10 complaints per month including the obscurity of procedural activities and unfriendly service personnel; 2. In 2012, the printing service for copies of tax payable notification and tax collection letter could use up 15 days up to 30 days; 3. The service was only provided at DPPKD office, creating long queues of taxpayers who were coming from the distance range of 20-25 km, which surely raised the higher transportation cost; 4. The industry-and-trade-based urban society demanded a reliable IT-based service; 5. There were about 60,000 taxpayers, who were not ready for globalization and technological era, residing in several township; 6. In 2012, taxpayers could only deal with their tax issues from 08.00 am until 03.00 pm at the designated payment point; 7. In 2012, taxpayers could only make their payment at two designated points, the DPPKD office and BJB (Bank of Jawa Barat and Banten) Cilegon; 8. In 2012, property-tax taxpayers were only able to acknowledge the principal amount of payable tax after they had received the Tax Payable Notification, which then allow them to pay the tax to the designated bank; 9. In 2012, the real time tax revenue monitoring did not exist so the Head of Local-Tax Office, as the stakeholder, needed to wait for the recapitulation made by the designated bank; 10. The level of leakage occurring in Book I of Property-Tax reached the number of 30% in the year 2010-2013 or approximately IDR 1 Billion annually; 11. In 2012, tax self-assessment system noted that nearly 20% of Local-Tax taxpayers had not delivered their Local-Tax Payable Notification on time. 12. From 2012 to 2013, the nominal of tax arrears have reached the amount of IDR 4 Billion; 13. From 2010 to 2013, there 30 reports on the cases of document forgery including the duplicated Tax Payable Notification and Local-Tax Collection Letters; 14. Local-Tax Realization Accomplishment Ratio to the Local Revenues in 2012 was 44.50% (scoping the Local-Tax Realization for IDR 147,686,542,561 and Local Revenues for IDR 331,861,814,250) which was far beyond the government target; 15. The level of public awareness to pay the Book 1 of Property Tax were still low, indicated by the revenue percentage of only 50%; 16. In 2012, Pro-Society-Funding Program needed improving as it is directly proportional to Local-Tax Revenue Accomplishment; 17. The satisfactory index of public services on Local-Tax management in Cilegon City was at 69.54 in 2012, categorized as Good, yet considered to be less optimal. The targeted group of beneficiaries of the “Pro-Society Tax Management Reform” initiative at the initiative of the Tax Management Reform are the underprivileged societies.

B. Strategic Approach

 2. What was the solution?
Strategies implemented by the local government, represented by Office of Local Revenue and Fiscal Management of Cilegon City, that initiated the program, in order to resolve the local-tax related matters include the following: 1. ISO 9001: 2008 and ISO 8385: 2000 To improve quality of local-tax service, the system and the procedures were standardized using the Quality Management Standard of ISO 9001: 2008, applied in 2011, licensed by the British Standards Institution (BSI). 2. Formation of 2 (two) Local Taskforce Unit for Local-Tax Matters Two Local Taskforce Unit were opened, in order to broaden the service, working (VPN) service to ensure the security of the system. Furthermore, this feature omitted the geographical problems, shortening the distance limit to 7-10 km, resulting in the decrease of the transportation cost. 3. SIMPAD (Local-Tax Management Information Systems) The system can accommodate the tax payment process starting from data collection, validation, billing, as well as accounting and reporting in an IT integrated environment. 4. Online Property Tax Payment System (Host to Host) The feature not only allows the taxpayers to pick the desired place of payment to do their obligation but also provide a 24-hour integrated property-tax information system, giving the taxpayers the easiness to control the report of their payment in real time basis. 5. Property Tax Billing Information System (http://www.pbb.cilegon.opensipkd.com) The leakage level of the Book 1 of Property Tax has been reduced to 0% due to the online information-displaying system, allowing taxpayers to control their payment as well as to keep the record for further documentation. 6. Revenue Monitoring System (http://www.pbbm.cilegon.opensipkd.com) This feature allows taxpayers to gain the information about the payment made in real-time mode. This is a form of control over local tax payment liability. The Mayor, Deputy Mayor, Regional Secretary, and Chief of DPPKD office as the official stakeholders can instantly access the latest information related to the development of revenue performance. 7. SMS GATEWAY SMS Gateway is a short messaging facility for Local Tax Notification service and a mean to send gratitude to the taxpayers who have made their payment. The taxpayers will be warned through their cellular numbers to fulfil their obligation. This service has been able to reduce the delinquent taxpayers, decreasing the rate to 80%, from IDR 4 Billion in 2012 and 2013 to IDR 1 Billion in 2014. 8. Field Officer The Field Officer are prepared to conduct the Delivery Service of the tax documents to the taxpayers in person. The service can be reached by dialing the official number of (0254) 392967. 9. SPPT and SSPD Securing and Controlling System (Security Printing) Security Printing service has been able to reduce the cases of tax-documents forgery, by applying Special Code recognized only by the official administrator, minimizing the chance of document falsification. 10. Mutual Cooperation with the State Attorney of Cilegon This is done to secure the payment made from tax arrears and to anticipate the solution for other tax-related legal issues. 11. Involvement of Neighborhood and Residence Apparatus Forum (FOKER-C) The forum are encouraged to assist the local government to distribute the property tax notification to communities and to socialize the benefit of Pro-Society Program funded by the local-tax paid by the taxpayers. The society’s level of awareness to fulfil their property tax is expected to increase from 80% to 95% by the end of 2014.

 3. How did the initiative solve the problem and improve people’s lives?
In an effort to accommodate as well as improve the accessibility, transparency, accountability, and public service approach by re-inventing government with the implementation of an integrated information technology system, the local government launched the one-stop service which include SIMPAD (Local Tax Management Information System), SMS Gateway services for accommodation, Online Property Tax Payment System (Host to Host), Tax Collection Information systems, and Local Tax Revenue Monitoring system. On the other hand the managerial supervision focus on the management mechanism of taxation procedures has been driven by an increase in the quality of management that is packaged in an ISO 9001: 2008 and ISO 8385: 2000. To fully utilize the local apparatus, Field Officers service has been in operation to facilitate and deliver tax-related information developments to taxpayers. Communities’ involvement are also made by optimizing the role of neighborhood and residence apparatus forum (FOKER-C) in collecting the property tax and disseminating the benefit of local-tax revenues allocated or returned to finance the Pro-Society Programs. This innovation was awarded Winner of Excellent Service Image in provincial level and was nominated 11 Best Public Service category (Top 33 Innovations in Public Service) organized by the Ministry of Government Apparatus Empowerment and Bureaucracy Reform.

C. Execution and Implementation

 4. In which ways is the initiative creative and innovative?
In terms of operational activities, Local Technical Taskforce Unit has been delegated to deal with all aspects related to the efforts of improving the local-tax management. In terms of IT-based service integration, the strategies implemented include the use of VPN system linking the whole payment service to Bank of Jawa Barat and Banten (BJB), allowing the chance of improvement of service acceleration and security. The use of security printing also ensure the lowest level of document falsification cases. The ISO 9001: 2008 certification obliges the institution to hold the internal audit twice a year and to hold a Management Review Meeting to evaluate quality objectives achievements. Every 6 months, surveillance audit is held by the British Standards Institution (BSI) intended to prove that the system has been implemented in conformity with the established procedures. In terms of securing the local tax revenues, the Office of Local Revenues and Fiscal Management cooperates with the District Attorney of Cilegon to resolve tax-related legal issues or taxation disputes and facilitate the tax collecting process to the taxpayers who are in arrears despite the prior persuasive efforts made. This move is conducted as the final step to mediate the taxpayers to immediately fulfil their obligation. To increase the awareness of fulfilling the tax obligation of the taxpayers residing in rural and township areas, the Office of Local Revenue and Fiscal Management involves the neighborhood and residence apparatus forum. The apparatus not only distribute the tax notification but also collect the payment and disseminate the information about the benefit of the tax revenue for society ii the form of the funding of Pro-Society Programs including: 1. Development Program in Education Field a. Extending educational coverage and service for all level b. Providing greater support to develop the religious education 2. Development Program in Employment Field a. Encouraging the regional and local investment b. Setting up qualified human resources. c. Implementation of basic territorial infrastructure development using labor intensive method d. Building automotive workshop infrastructure 3. Development Program In Health Field a. Expanding the Free Health Services b. Improving facilities and infrastructure c. Expanding the Health Insurance coverage d. Improving the Quantity and Quality of Health Workers. e. Improving health education through promotional and preventive efforts 4. Development Program in Economic Field a. Restoration of Uninhabitable Housings (RTLH) b. Direct Aid for Society c. Funeral Grant d. BPJS-Integrated Local Health Insurance e. Capital Assistance for RTS. f. Honorarium for independent Cilegon charity workers

 5. Who implemented the initiative and what is the size of the population affected by this initiative?
The list of stakeholders involved in the implementation of the system include the following: 1. Ministry of Finance, Ministry of Law and Human Rights - Regional Office of Banten province, the Ministry of Internal Affairs, Bureau of Law – Government of Banten Province; Providing assistance in evaluating the local regulation drafting on local tax matters 2. Primary Tax Office of Cilegon Providing assistance in the transition process of property tax and excise on Acquisition of Land and Buildings. 3. DPKAD (Office of Local Budgeting) of Banten Province Providing assistance in facilitating the transition stages of property tax. 4. Legislative Council of Cilegon Approving the Regional Regulation on local taxes. 5. Associated Local Government Agencies of Cilegon (Division of Administration Affairs and Division of Legal Affairs of Local Secretariat of Cilegon City) Providing assistance in evaluating the local regulation drafting on local tax matters and facilitating the establishment of the Local Technical Taskforce Unit on Tax Affairs 6. State Attorney Office of Cilegon Providing assistance in resolving the legal problems of local taxes linkages, as well as mediating the active collection efforts on delinquent local taxpayers. 7. National Land Affairs Agency of Cilegon Providing assistance in reconciling the data of property tax objects 8. Bank of Jawa Barat and Banten Provide the linkage on-line payment system and designated as local payment point. 9. Indonesian Notaries Association - Branch Cilegon Providing assistance in the process of tax acquisition for Excise on Acquisition of Land and Building 10. Neighborhood and Residence Apparatus Forum (Foker-C), Assisting the property tax collection and disseminating Local Government program funded by the results of local tax revenue 11. Journalists and Media Coverage Providing assistance in the reporting, notifying, and socializing the linkages to local tax exposure on local media
 6. How was the strategy implemented and what resources were mobilized?
The funding for the innovation derived from Local Budget of Cilegon City. And to support the implementation of the program are applicable also involve other agencies, in the form of grants of goods (infrastructure) Printronix printer from BJB Branch Cilegon, servers, and placement of personnel in Local Technical Taskforce Unit on Tax Matters for property tax payment; and infrastructure leasing of Printronix printers (2 pieces) from Primary Tax Office of Cilegon. To finance the implementation of the Innovation good preparation facilities and infrastructure, procedures, capacity building of staff, the total cost would be around IDR 1 Billion, but the cost is much smaller than the benefits taken. In terms of technical management, the service operation is assisted by 2 (two) Local Technical Taskforce Unit (UPTD) on Tax Matters, consisting of 1 (one) Head of Division, 3 (three) Section Chief (Data Collection, Validation, and Billing) and 2 (two) Unit Chief. The legal foundation for the operational activities are Cilegon City Local Regulation No. 3 Year 2013; Regulation oof Mayor No.23 Year 2013; and ISO 9001: 2008 Document No. Rev.01 Year 2013. To support the technical implementation of the local tax services assisted by employees in accordance with the qualification that have been set as follows: • 4 (four) Console Operators and 4 (four) Appraisers, holding 1st Degree Diploma from STAN (State College of Accountancy) • Executors who have participated in various training and/or technical workshop on local tax held by government institutions such as STAN, Ministry of Finance, Ministry of Internal Affairs, Provincial Training Agency, and Local State Apparatus Agency of Cilegon • 6 (six) executors who have been in internship at Primary Tax Office of Cilegon for the period of 6 months.

 7. Who were the stakeholders involved in the design of the initiative and in its implementation?
With some of the strategies and initiatives that have been implemented through the tax reform area (of the people by the people for the people) local tax issues can be resolved include: 1. During the period of January 2014 - September 2014 no procedure-related and the service friendliness complaint has been filed as the procedures and quality of service has been standardized in ISO 9001: 2008. 2. In 2014, the time needed for printing-related activities only take 5 minutes of service. 3. Services are not only provided at DPPKD office, but also provided at 2 (two) UPTD-Local Tax Offices, covering the geographical distance of 7-10 km, resulting in the decrease of transportation cost. 4. With the implementation of IT-based systems, communities are able to get the information online, without having to come directly to the office. 5. With the help of field service personnel, problems of around 60,000 taxpayers residing in the township can be served with a local tax delivery service. 6. In 2014, the taxpayers are able to pay their tax obligation without any time boundaries due to the 24-hour non-stop service and the easiness to make the payment at all branches of BJB al over Indonesia. 7. Property Tax Taxpayers-P2 are able to gain information about their up-to-date tax billing. Leakage rate in the Level-1 Property Tax in 2014 could be reduced to 0% due to the application used as a social control for tax revenues. 8. In 2014, monitoring of tax revenue can be determined in real time by the leadership as policy makers. 9. In 2014, self-assessment tax system managed to accomplish the timely delivery of SPTPD, due to SMS reminder from SMS gateway service and Delivery Service conducted by the Field Officer. 10. In 2014, the number of delinquent taxpayers can be reduced to 90% due to the cooperation with the State Attorney Office of Cilegon. 11. Security Printing feature has help reduce the number of tax document forgery or falsification. 12. There have been significant improvement of Factual Local Tax Ratio to Expected Local Tax until 2014, as in August 2014, the increase reached 59.11% (the factual number was IDR 161,140,960,949 from the expected amount of IDR 272,634,195,710) 13. Satisfactory Index of Local Tax Service in Cilegon City in 2013 reached the level of 85.74% increased by 16.20% compared to the index in 2012 amounted to 69.54%.

 8. What were the most successful outputs and why was the initiative effective?
Monitoring mechanism in the system is an innovative application that can be done daily by the government of Cilegon City in order to conduct the controlling function by doing on-going-basis database backup. The stakeholders are able to review such process through the compiled data from the system. In addition, monitoring and evaluation is done regularly and continuously for all the management in order to improve the services in the future. Tri-monthly evaluations are also done to the officials and helpers, ensuring the security of the collection process and qualified service for taxpayers. In order to guarantee the Quality of Service with the implementation of a procedure ISO 9001: 2008 all components of the services in the field of local tax are subject to internal audits twice a year. Management Review Meeting is also conducted to evaluate quality objectives achievements. Beside, every six months, the surveillance audit is done, conducted by the British Standards Institution (BSI) intended to prove that the system has been implemented in conformity with the established procedures. To ensure the satisfactory index on the quality of the service, annual survey is done by the Office of Local Revenues and Fiscal Management in collaboration with Cilegon City Local Secretariat Agency. Furthermore, to receive reports or complaints of service rendered by local tax officials, the office opens the hotline number of (0254) 392967. To deal with all tax-related legal issues and problems, the DPPKD Office routinely holds a meeting with State Attorney Office of Cilegon. To measure the success of collection of property tax and excise on the acquisition of land and building, the DPPKD office holds a routine meeting with officials from Primary Tax Office of Cilegon. Every three months, the DPPKD officials holds a meeting with Commission 2 of Local Legislative Council to carry out evaluation on the tax revenue as well as evaluating the local tax management, creating a basis for determining the target for local revenue and expenditure. Another evaluation done for the implementation of the process is the monthly meeting led by the Head of the office. To enhance the apparatus capacity, the DPPKD office hold annual Character Building activities.

 9. What were the main obstacles encountered and how were they overcome?
Several obstacles arisen from the innovation include the following: 1. The lack of understanding of dynamic working environment and working pattern based on the latest Standard Operating Procedures; 2. The limited understanding of the taxpayers in fulfilling their tax obligation; 3. The state of readiness to welcome and deal with globalization and technological era among societies in most rural areas; 4. Centralized services at the local tax offices, causing the accumulated workload and slow work-pace; 5. The state of controlling regulation on tax-related matters. To overcome the above problems, The DPPKD office performs some steps below as solutions and answer to the existed problems: 1. To improve the understanding of local tax officials, the DPPKD office conducts technical workshop, training, technical improvement course, socialization, Standard Operational Procedures linkage to local tax services. 2. To improve the taxpayers’ understanding about the tax-related issues, the DPPKD office conduct the media socialization. 3. Field service officers provide extra service by visiting the taxpayers in rural and/or industrial area in person. 4. To reduce the accumulated working-load and to accelerate the time of service, the DPPKD office formed 2 (two) Local Technical Taskforce Unit on Tax Matters, each serving 4 (four) districts. 5. To accelerate the prompt, accurate, responsive, and efficient, the Head of the office delegates several authorities including the provision of information and Tax Subject and Object Validation.

D. Impact and Sustainability

 10. What were the key benefits resulting from this initiative?
The government of Cilegon City directly distributes the result of tax revenues earned by the government in the form of funding the following Pro-Society Program: 1. Uninhabitable Housing (RTLH) restoration, covering the budget cap of IDR 7,5 Billion with a target of 750 houses, meeting the aid requirements; 2. Scholarship aid for underprivileged students residing in the RTLH. The covers the amount of IDR 4.372 Billion; 3. Tuition-Fee and SDP-Fee Grant for Secondary and Higher Secondary level, covering the amount of IDR 20.69 Billion, targeting 11 State Secondary Schools, SPP 3 and DSP Free in Public Schools middle and high school level of Rp. 20.69 billion mark target group 11 junior high schools, 5 State Higher Secondary Schools, and 4 State Higher Vocational Schools. 4. Direct Aid for Society covering the amount of IDR 5.5 Billion, targeting 12,822 family residing at RTS. 5. Subsidized Rice Aid for underprivileged society covering the amount of IDR 4.65 Billion, targeting 11,896 families residing in RTS; 6. Funeral Grant for 12,822 families residing in RTS, covering the amount of IDR 1,076 Billion. 7. Healthy Latrine Initiative, covering the amount of IDR 100 million targeting group of 100 houses meeting the p that meet program criteria RTS healthy toilet. Rogram requirement and criteria. 8. BPJS-integrated Local Health Coverage covering the amount of IDR 7.7 billion, targeting 30,000 inhabitants of RTS. 9. Capital Aid for Entrepreneurship covering the amount of IDR 1 billion per one district. 10. Honorarium for independent charity workers covering the amount of IDR 2.71 billion, targeting 224 groups of workers. The most significant impact from this innovation is the increasing level of satisfactory index from taxpayers on the tax-related public services. The number climbs up to the 85.74%. The percentage is backed up by the real tax amount collected by the government from 2012 until 2014, showing a progressive trend. Quoted from Budget of Cilegon City 2012, 2013, and 2014 (3 months tax period left in 2014)

 11. Did the initiative improve integrity and/or accountability in public service? (If applicable)
The current probability of the replication limits the development of this innovation into internal consumption only. Until present time, no district/city has ever initiated such similar innovation, particularly on the development of the Property Tax Billing Information System and Revenue Monitoring System. In the future, it is a great chance of this innovation to be a pilot project for local and regional innovation development, both internally and externally. Some local governments, government agencies, and universities have been visiting the DPPKD office of Cilegon City. Those entities include some of the following: 1. Employees of Ministry of Social Affairs (Study on The Implementation of Quality Management System ISO 9001: 2008 on Local Government Agencies) 2. University of Tirtayasa of Banten (conducting a study related to the Public Service Improvement) 3. The DPPKD Office of Serang City (Study on Property Tax Management) 4. The Office of Local Revenue of Serang Regency (Study on Property Tax Management) 5. The Office of Local Revenue of Pandeglang Regency (Study on Property Tax Management) 6. The Office of Local Revenue of Bandung City (Study of Property Tax Management and Implementation of Quality Management System ISO 9001: 2008) 7. Education and Training Agency of Indonesian Center of Statistics Agency (Study on Local Tax Management) 8. The DPPKD Office of Pontianak City (Study of Property Tax Management and Implementation of Quality Management System ISO 9001: 2008) 9. The DPPKD Office of Cimahi City (Study of Property Tax Management and Implementation of Quality Management System ISO 9001: 2008). 10. The Office of Local Revenue of Bandung Regency (Study on Property Tax Management)

 12. Were special measures put in place to ensure that the initiative benefits women and girls and improves the situation of the poorest and most vulnerable? (If applicable)
As explained in the Regulation of Minister of Government Apparatus Empowerment and Bureaucratic Reform No. 20 Year 2010 on the Road Map of Bureaucratic Reform in Indonesia 2010-2014, it is crucial to create breakthrough in public services and to omit the common opinion that bureaucratic service is a complicated matters to deal with. This has become one of the strong foundation for the government of Cilegon City create innovations in order to improve the quality of public services. One form of the new breakthrough is the development of some of the online system in the local tax management matters. The essence of the concentration of the management of local taxes DPPKD is that the shape of the innovations that have been rolled out is a form of bureaucracy trimming through re-inventing government which is nothing but aiming to improve public services in the Government of Cilegon City. Factually, the Government's efforts in achieving Cilegon bureaucratic reforms are not only in the taxation area, but has been done on an ongoing basis through leading sector spread across the institution with the control from the District Secretariat Cilegon. Even the attempt to change the mindset and culture has also been done through the character building coaching activities.

Contact Information

Institution Name:   SERVICE REVENUE AND FINANCIAL MANAJEMEN AREA OF CILEGON CITY
Institution Type:   Government Agency  
Contact Person:   MAMAN MAULUDIN SH, M.Si MAMAN MAULUDIN SH, M.Si
Title:   HEAD OF SERVICE REVENUE AND FINANCIAL MANAJEMEN AR  
Telephone/ Fax:   +62 254392967, FAX: +62 254377594
Institution's / Project's Website:  
E-mail:   dppkd.cilegon@yahoo.com  
Address:   KOMPLEK SUKMAJAYA MANDIRI KAVLING 7 JL. AHMAD YANI
Postal Code:   42416
City:   CILEGON
State/Province:   BANTEN
Country:  

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