The Impact of Local Tax Realization and the Quality of Capital Expenditure on Rural Economic Growth

Abstract

Purpose: This study examines the causal impact of local tax realization and the quality of capital expenditure on rural economic growth in Dompu Regency, partially and simultaneously. Research Method: An explanatory quantitative approach was used. Primary data from village financial apparatuses and community representatives in Dompu Regency were collected through questionnaires via purposive sampling and analyzed using PLS-SEM in SmartPLS. Results and Discussion: Results reveal that local tax realization has no significant partial effect on rural economic growth. Conversely, capital expenditure quality has a positive, highly significant effect. Simultaneously, both variables substantially drive rural economic growth, explaining 62.7% of its variance. Implications: Local governments must prioritize transparent, efficient, and well-targeted capital expenditure on vital rural infrastructure, rather than merely chasing administrative revenue targets, to effectively stimulate grassroots productivity. Originality: The novelty lies in shifting the fiscal evaluation focus from macro-level nominal budget volumes to the essential "quality" of expenditure specifically within a rural socio-geographical locus.