Analysis of the Potential of Land and Building Tax (PBB) and Restaurant Tax in Increasing Local Own-Source Revenue (PAD) of Medan City: A Case Study at the Medan City Regional Revenue Agency

Abstract

The purpose of this study is to analyze the potential of Land and Building Tax (Pajak Bumi dan Bangunan/PBB) and Restaurant Tax in increasing the Local Own-Source Revenue (Pendapatan Asli Daerah/PAD) of Medan City, to examine the contribution of Land and Building Tax (PBB) and Restaurant Tax to the Local Own-Source Revenue of Medan City, and to evaluate the effectiveness of Land and Building Tax (PBB) and Restaurant Tax revenues in enhancing the Local Own Source Revenue of Medan City. This study employed a quantitative descriptive research method. The research was conducted at the Regional Revenue Agency of Medan City. Land and Building Tax and Restaurant Tax are important sources of regional tax revenue that play a significant role in supporting the increase of Local Own-Source Revenue. The results of the study indicate that both Land and Building Tax and Restaurant Tax have considerable potential to increase the Local Own Source Revenue of Medan City, as reflected by their average potential ratios of 131.27% and 114.62%, respectively, during the 2021–2025 period. The contribution of Land and Building Tax to the Local Own-Source Revenue is greater than that of Restaurant Tax, with an average contribution of 19.07%, while Restaurant Tax contributes an average of 9.74%. In terms of effectiveness, Restaurant Tax revenue demonstrates a higher average effectiveness rate of 87.70%, compared to the effectiveness of Land and Building Tax revenue, which averages 77.41%.