In a democracy, members of the public pay taxes to an elected administration in the expectation that the money will be used responsibly to provide public services.

So, while the payment of taxes represents the public's participation in a common cause, their use provides a yardstick by which the public can judge the performance of an administration.

According to analysts, there is currently a distinct lack of a direct correlation between the payment of taxes and government accountability in Indonesia's system of local autonomy -- something that severely hinders the implementation of good governance in the regions.

Accordingly, the national government needs to hand over the power to levy certain taxes -- particularly property taxes -- to the country's local administrations.

In a presentation to a workshop on local governance and financial management Tuesday, the Dean of the University of Indonesia's School of Economics, Bambang Brodjonegoro, said that while Law No. 22/1999 on local administration, as amended by Law No. 32/2004, was a breakthrough in the effort to promote good governance, public participation, transparency and accountability through the direct election of local officials, its associated legislation -- Law No. 25/1999 on inter-administration fiscal balance, as amended by Law 33/2004 -- failed to replicate the same spirit of reform.

"The fiscal balance legislation fails to complement the direct election concept by permitting direct local taxation ...," he explained.

The two-day workshop was sponsored by UI's Institute for Social and Economic Research, the World Bank and local governance advocacy institutes.

Although the voters in a particular region could use the spending of administration funds as a yardstick for holding local officials to account, Bambang said that this was not enough as local budgets were financed mainly by the central government, with almost no direct taxes being levied at the regional level.

"Given this situation, the administration could try to shift the blame or responsibility onto the central government, which has direct taxing powers over personal income and property," he said.

The fiscal balance legislation requires the central government to provide local administrations with revenue sharing funds, general allocation funds and special allocation grants, which this year amount to a total of Rp 220 trillion (US$23.6 billion), mostly financed out of national tax revenues of Rp 416 trillion.

At the provincial level, local revenues are derived from limited direct taxes on vehicle ownership and transfer, fuel, and ground water use, while at the regency and municipality levels they are derived from taxes on hotels, restaurants, advertisements, entertainment centers, on-street parking and lighting, and the mining of certain minerals.

However, Bambang said these local taxes had a limited influence on voters. A more meaningful correlation would arise from direct property taxes at the local level.

"Since property ownership is of great concern to the voters, this would affect them directly, and make them more interested in ensuring that the taxes they have paid are spent wisely by their respective administrations," he said.

Similar suggestions in the past have been met with strong opposition from the Finance Ministry's Directorate General of Taxes. Finance Minister Sri Mulyani said recently that she would continue restricting the types of taxes local administrations could levy as many of them only served to deter investment.

Bambang argued, however, that greater local taxing powers would provide incentives for administrations to enhance their own revenue collection abilities without resorting to novel or burdensome taxes and levies that only retarded economic development.