There is increasing interest in fiscal decentralization in Peru as a mechanism to generate more involved decision-making at the subnational level. This is tempered with a continuing emphasis on overall fiscal stability. However, considerable work needs to be undertaken to define more clearly expenditure responsibilities and financing mechanisms that increase local accountability. In addition, a more transparent fiscal transfer system is needed, together with clarity in expenditure management at all levels of government. The paper suggests that a substantial work agenda is needed to extend the decentralization process with greater transparency.
This paper attempts to trace and find evidence for the linkages between the quality of governance, and development at the local level since the adoption of the fiscal decentralization policy in the Philippines in 1991. The concern since then over the links has been prompted by the observed persistent imbalances in local development - across and within regions - which many believe is due to the less than prudent exercise of the devolved powers and responsibilities - hence, low quality of local governance. To be sure, the decentralization has led to not a few innovations in local service delivery and financing, and in increased people's participation in local civic activities. However, the spread of innovation has been slow and there has been less than genuine participation in the mandated local special bodies. The uneven quality of local governance thus may have contributed to imbalanced regional growth. Evidence also indicate that the initial level of economic conditions determine the acceptable quality of local governance, which explains why certain poor areas remain in the vicious circle of penury and misgovernance. To help improve the quality of local governance, some policy inputs are suggested.
Matthias Zana Naab, PhDUniversity of Pittsburgh, 2005This study examines decentralization and democratic local governance in Ghana by assessing the effectiveness of the performance of District Assemblies (DAs) in order to better understand how DAs plan, implement, and manage development activities in close partnership with communities. It applied the proposition that decentralization and democratic local governance are expected to result in more efficient, effective, sustainable, and equitable outcomes through the hypotheses that decentralization results in more effective local government; more responsive local government; local government that is democratic, more accountable, and more participatory; local people having more positive perceptions of government; and local governments providing high quality services that respond to local demands.Engaging in both exploratory and explanatory research, this study identifies important variables and relationships as well as plausible causal networks that shaped local government and governance in Ghana. Using an inductive and theory-building design, it explains a model of decentralized governance and highlights potential partnership arrangements for the effective engagement of Community-Based Organizations (CBOs) in complementing the efforts of local governments.The results of decentralization, interpreted through questionnaires as well as stories and conversations with local people in two Ghanaian District Assemblies, was a combination of success and failure. In the two case study districts, the assemblies have resulted in a slight increase in development projects and services. However, the poor level of local revenue mobilization has limited the ability of the assemblies to finance significant development projects in their districts. Consequently, this has forced the assemblies to depend on the District Assemblies' Common Fund as well as on external donor funded projects and programs and on local people in self-help projects. The analysis of revenue and expenditure patterns in the two districts showed that per capita development spending was low, while recurrent expenditure and spending on local government infrastructure was high. District assemblies and CBOs often remain unwilling partners, and both are faced with serious capacity constraints which militate against structuring effective partnerships for service delivery. The successful implementation of decentralization depends on the degree to which national political leaders are committed to decentralization, and the ability and willingness of the national bureaucracy to facilitate and support decentralized development. Therefore, the ongoing process of decentralization in Ghana must be seen in the broader context of a deliberate redirection and change in the internal regulatory framework of the state.
In the last 40 years, in public finance the examination of spatial aspects of federalism and intergovernmental fiscal relations was dominated by allocative and distributional issues. Modern growth theory and complementary approaches lead to a shift in the research perspective. Against this background the paper discusses how the findings of modern growth theory can affect the design of intergovernmental fiscal relations. The results of this analysis can be summarized as follows: (1) the existence of a geographically different growth dynamic provides an additional justification for a decentralization of political competences. (2) To cover more exactly the regional economic backward and forward linkages, especially local government authorities should intensify their cooperative behavior. (3) From the perspective of economic growth, the equalizing effect of horizontal transfers between decentralized jurisdictions should be limited.
Decentralization of government with property tax financing is the standard recipe for public sector reform. Fiscal competition is assumed to stimulate efficiency and hold down the tax level. Property taxation offers additional incentives for efficiency. We study the incentive mechanisms involved using data for decentralized governments and in a setting where they can choose to have property taxation or not. The empirical analysis addresses whether fiscal competition and political control problems influence the choice of having property taxation. The results indicate that both incentive mechanisms are relevant and consequently support the standard advice. Fiscal competition generates a distinct geographic pattern in local taxation and political fragmentation seems to motivate property taxation to control common pool problems. The main methodological challenge handled concerns spatial interaction with discrete choice.
Decentralization in Indonesia was introduced institutionally in 2001, with a democratization drive promoted by international donors and by the intention of the new government to clear away the centralistic image of Soeharto. Decentralization has had some effects on regional economies and on local government administration. Compared to the period before decentralization, the share of GRDP and local government finance has increased in Java, though investment and bank borrowing have expanded to the outer islands. In qualitative aspects, decentralization has transferred not only administrative authority but also many new vested interests from the center to regions. Local governments have become more extensive economic actors in regional economies. Regional economic actors now compete actively for such vested interests and have missed the opportunity to create market-friendly regional economies. The government sector should not be a mere rent-seeking economic actor, but should play a role as a facilitator promoting private sector activities in regional economies.
This dissertation explores the politics of fiscal decentralization in comparative perspective. Case studies of Argentina and Spain are used to provide insights into the way that the distribution of institutional and economic resources in multitiered polities shapes the extent to which the policy of transferring revenue and revenue authority to subnational governments can be exploited for political gain. This approach draws attention to the political conditions that inhibit the coordination of fiscal reform efforts between the different levels of government and perpetuate the financing of subnational spending with revenue collected by the national government. This political context undermines national fiscal adjustment efforts and leads to economic catastrophes such as those experienced in Argentina throughout the last two decades. Specifically, this study uses statistical analyses and empirical institutional theory to show how patterns of territorial representation and bargaining strategies hindered revenue decentralization in Argentina but advanced it in Spain.The research suggests, first, coalition-building goals drive national executives in Argentina to reach out legislators of the opposition by means of allocating larger shares of federal transfers to the provinces the latter belong to. However, all else equal, legislatively overrepresented, i.e. economically marginal and sparsely populated, provinces will be targeted first. Second, the increasing role of regionalist parties in Spanish national politics and their acceptance in joint-policy mechanisms tilts the allocation of chosen federal transfers slightly in favor of economically developed and densely populated autonomous communities, which are generally governed by regionalist forces. Third, whereas Argentine subnational interests are "locked-in" at the Senate level and intergovernmental negotiations are conducted bilaterally, open-ended institutional arrangements and a relatively impotent senate in Spain boosted the redressing of regional concerns through informal intergovernmental fora and increasing multilateral collaboration Fourth, such differences in patterns of institutional representation and bargaining strategies explain the paucity of fiscal decentralization in Argentina and its relative progress in Spain.
In the literature on the subject of economy there are three functions of public finance \ndescribed: stabilazing, redistributing and allocating. Effectiveness of realization of the abovementioned \nfunctions depends to a large extent on the political system of a given country, \nespecially on the degree to which it is decentralized. In the article the author embarks on an \nattempt to identify the advantages and disadvantages of decentralization of particular public \nfinance functions and in effect to show which of the functions can be more effectively realized \nby the central authorities and which of them can be decentralized that is transfered to the \nlocal authorities.
O trabalho discute, do ponto de vista economico, as vantagens e desvantagens que diferentes graus de centralizacao/descentralizacao fiscal e tributaria apresentam para um crescimento economico equilibrado. Para tanto, sao apresentadas as posicoes defendidas pelos centralistas e descentralistas, autores que, baseados nos resultados de suas pesquisas, tendem a se aproximar de um ou de outro polo, no continuum do sistema politico federalista, os primeiros sustentando a concentracao do poder de tributar e de gastar nas maos do governo central, e os ultimos defendendo a devolucao desses poderes ao nivel de governo o mais distante possivel do centro. O trabalho comeca apresentando as relacoes entre o Federalismo e as estruturas tributaria e fiscal; em seguida coloca a polemica entre as duas correntes mencionadas, concluindo com a indicacao dos temas de uma agenda de pesquisa voltada para o estabelecimento de uma estrutura fiscal e tributaria adequada aos paises em desenvolvimento, uma vez que muito da literatura sobre o tema esta voltada para os problemas dos paises desenvolvidos.Abstract This paper provides a discussion, in economic grounds, of the advantages and disadvantages that different degrees of fiscal and tax centralization/decentralization pose towards achieving a balanced economic growth. Accordingly, it introduces arguments and contentions of both centralist and decentralist authors. Based on their research outcomes they reveal a tendency towards a polarized position within the continuum of the political system of federalism. Whereas the former group sustains the concentration of taxation and spending powers at the federal level, the latter advocates the devolution of such powers to the level of government the most afar from the center. The paper starts presenting the relationships between Federalism and fiscal and tax structures; then it analyses the arguments posed by members of the two streams of thought and concludes proposing specific themes to compose a discussion agenda devised towards the institution of fiscal and tax structures specifically designed to fulfill particular characteristics of developing countries, given that most of the literature is based on the experience of developed countries. Key words: Public goods. Public finance. State and local taxation. State and local budget and expenditures. Intergovernmental relations. Federalism
The world is experiencing dramatic fiscal reconstruction in the socialist and (former) socialist countries and of continuing and fascinating evolution of government structure elsewhere. Being one of the fastest growing economies over the past nearly three decades, China seems deeply embracing this global mantra of power devolution in her effort to energize local economy that was suffocated in the highly constricted state-planning system. The literature of the Chinese central-local studies suggests that fiscal decentralization from the central government to provincial governments is a key institutional factor to explain Chinese economic success. However, the literature misses various lower levels of government in China. Has the fiscal power been eventually trickled down to them? This is the question addressed in this project. This project makes several contributions to the thriving Chinese central-local study. It brings back the missing local governments in the intergovernmental debate. By linking various local governments with the national government, the findings in this project help to draw a more comprehensive and holistic picture of the intergovernmental fiscal relations in China. Such a study on the evolution of fiscal structure among local governments also adds knowledge to understand the broad economic and administrative transformation in contemporary China. Using the latest datasets of public finance, this project performs a series of statistical analysis to understand if fiscal decentralization has taken place to each level of Chineselocal governments in the reform era. This project also tests the factors that have been widely identified in the classical welfare theory as explanative factors for the fiscal arrangement at different levels of local government. This project finds out that fiscal decentralization fails to capture the main trend of the intergovernmental fiscal relations at various Chinese local governments. Instead, there has been a rather consistent pattern of fiscal centralization across those local governments during the 1990s and the early 2000s.
For a variety of reasons, many developing countries especially since the 1990s have embarked on programmes of democratic decentralization that are aimed at creating local self-governing systems that are democratic, relatively autonomous and effective in delivering services.Finding independent sources of financing for these emerging, locally based organs of governance has been one of the central challenges that confront these efforts in most countries.The literature suggests that sources of independent local government revenue are few in poor countries.As a result, most countries design decentralization programmes that depend heavily on intergovernmental transfers from national to local governments.Given widespread poverty that exists in most developing countries, this is a crucial strategy.However, the problem is that many central governments are engulfed in a systemic financial crisis and are desperately exploring strategies for reducing their expenditure commitments.One outcome is that revenue transfers are often irregular or fall much below the levels of expenditure decentralization, leading to serious fiscal gaps at the local level.Even where transfers are adequate and reliable, a fiscal regime which compels local actors to depend so heavily on central financial arrangements for practically all of their expenditure requirements undermines the development of lateral (local state-citizen) rather than vertical (central-local state) relations within the state, with serious implications for public participation and effective accountability.In the meantime, cities of developing countries continue to grow phenomenally in a way that makes conventional strategies for financing urban infrastructures unsustainable.Many analysts view this rapid urbanization as fatally aggravating the problem of urban/local governance.This paper suggests a different and more positive view.It reviews the literature which concedes that property taxation remains largely untapped and might indeed be progressive in developing countries.This literature highlights mainly the technical constraints to progress-assessment, valuation and collection.In contrast, this paper contends that the tax suffers from a combination of political and technical factors where the latter are dependent not independent variables.The paper undertakes an analysis of the key stakeholders in implementing successful property taxation policies based on research conducted in four countries-India, Nigeria, Republic of South Africa and Zimbabwe in the early 1990s.The paper suggests that willingness, opportunity and capacity remain critical factors and demonstrates how opposition to the tax can be overcome by strategic partnerships between central and local governments, public and private and domestic and external actors.
This paper concerns redistribution and public good provision in an economic federation with two levels of government: a local government in each locality and a (first mover) central government. Each locality is characterized by two ability-types, and the ability-distribution differs across localities. The central government redistributes via a nonlinear income tax and a lump-sum transfer to each local government, while the local governments use proportional income taxes and provide local public goods. We show how the redistributive role of taxation is combined with a corrective role, and how the central government can implement the second best resource allocation. Copyright 2008 Blackwell Publishing, Inc..
This study aims at assessing the performance of local government in Palestine in regard to fiscal and administrative decentralization. Data was gathered from the Ministry of Local Government, Ministry of Finance and a questionnaire was sent to 12 municipalities' key officials. It was found that the government is organized into the central government headed by the president, the cabinet, the governorates, mayors and village councils. The main functions of the local governments are to provide the necessary needed services. It was found that there is a degree of decentralization in providing the intended services as the functions of each level is clearly defined by the law, even though there is an overlapping amongst these functions due to the current situation instability The study explains several aspects including organization of the local government, decision making process, functional responsibilities, partnership among local government and the performance of these partnerships, employment, training programs, the most urgent issues regarding decentralization process, local government finances, financial standing of municipalities, relationship between central and local governments, and decentralization reforms under preparation, The study ends up with conclusions and recommendations. تهدف هذه الدراسة إلى تقييم أداء الهيئات المحلية في فلسطين فيما يتعلق باللامركزية الإدارية والماليـة. وقد تم جمع البيانات اللازمة للدراسة من وزارة الحكم المحلي ووزارة المالية، إضافة الى استبانة كانت قد أرسلت إلى 12 مسئولاً من مسئولي 12 بلدية. وتبين من البحث أن التنظيم الإداري للحكومة يتكون من الحكومة المركزية والمحافظات والبلديات والمجالس القروية. ووجد أن وظائف الهيئات المحلية تتركز في تقديم الخدمات الأساسية للمواطنين. وتبين أن لدى هذه الهيئات درجة كبيرة من اللامركزية في تقديمها لهذه الخدمات، لأن وظائف هذه الهيئات محددة بشكل واضح في قانون الحكم المحلي الفلسطيني، إلا أن هناك بعض التداخل في بعض الصلاحيات نتيجة للظروف الحالية. وأوضحت الدراسة العديد من القضايا الخاصة باللامركزية المالية والإدارية منها: التنظيم الإداري للهيئات المحلية، وعملية اتخاذ القرارات، والمسئوليات الوظيفية، والتعاون بين الهيئات المحلية في تقديم الخدمات، القوى العاملة في الهيئات المحلية والتدريب والحوافز، والقضايا الملحة فيما يتعلق باللامركزية، وتمويل الهيئات المحلية، والأوضاع المالية لهذه الهيئات وعلاقاتها بالحكومة المركزية، والإصلاحات الجارية الخاصة باللامركزية. وانتهت الدراسة بالخلاصة وعدد من التوصيات.
Japan is stuck between lots of rocks and several hard places. It confronts the escalating costs of the world's most rapid pace of ageing with a low and declining birthrate and virtually no support for mass immigration. Moreover, the country faces these costs while severely handicapped by a public debt 1.5 times its GDP plus dramatic declines in the high rate of savings that has hitherto financed it. In addition to all this, the poorly performing economy is in its fourth year of deflation with little hope of producing a recovery in tax revenues. Indeed, deflation and minimal economic growth have eroded national income- tax revenues to their lowest level since the collapse of the bubble economy.
If the political climate is stable, local elections in Croatia take place every four years. Budgets are planned for three years, while strategic development programmes cover periods of five to ten years. Technically, the political, financial and developmental programming cycles can be matched, and implementation of the programmes ensured. However, political programmes are generally vague, budgets are every so often fictive and revised mid year and development programmes grow into visionary shopping lists. Reality shows that programmes and plans are elaborated, presented in public and then neatly put into drawers. In the aftermath, local politicians are concerned mainly about the financing flows and this is what they are usually fighting for at council meetings and in various ministries. Regularly, local administration proceeds according to the wishes of the political decision makers, without referring to any program in the end. Consequently, political accountability is lacking, fiscal management is not transparent and development is lagging behind. The main aim of this paper is to show how strategic development programmes, budgetary plans and political programmes can be linked in the Croatian socio-economic and institutional environment. Also, in line with the initiated process of decentralization in Croatia, local governments have to improve their fiscal management in order to be able to take over new functions and responsibilities. Since by now a number of local development programmes exist in Croatia, where a participatory and strategic development planning approach was applied, an analysis of the political programmes, local budgets and development programmes can be done. The purpose of this research is to demonstrate that if local governments better understood the interdependencies between these three segments, they could create reference points for their actions visible in their programmes and budgets. In this way a platform could be created to enhance the political accountability, improve fiscal capacity and fulfil developmental goals in line with real needs and potentials of the local population.
The Baltic countries’ local governments have been functioned during the last decade in a permanently changing environment. Like other transition countries, they inherited from the past extremely centralized administrative system. Along with radical reforms, administrative system was decentralized and various functions were devolved from central to lower levels of government. Despite that, municipalities are still fiscally strongly dependent from central authorities. Often their fiscal capacity is not adequate to act in accordance with functions stipulated by laws. Many local governments’ revenues from taxes and user-charges are insufficient to finance efficiently their expenditures. Disparities in municipalities’ fiscal situation are correlated with unbalanced regional growth, social degradation in the low-income regions and growing differentiation by municipalities’ residents on access to education and healthcare. Membership of the European Union brings new tasks and responsibilities for the Baltic local governments. Municipalities should increase their economic sustainability and enhance administrative capacity to explore EU accession funds and implement EU policies. Considering the above-mentioned problems, the paper focuses on current fiscal situation of local governments in the Baltic countries. The main interest is to analyze local municipalities’ revenue level and structure, expenditure composition and fiscal autonomy conditions
Even in the wake of the most sweeping campaign finance reform law to be enacted in three decades, further significant reform is inevitable. Special interest money continues to flow through loopholes in the Act, and the Presidential Election Campaign Fund is near collapse. The next reform should encourage broader participation in the political process by individual citizens, both to dilute the power of special interests and to serve independent democratic values that recent Supreme Court jurisprudence has identified as vital to meaningful reform. We propose adopting a refundable tax credit of $100/taxpayer for political contributions to federal candidates and national parties; the credit would be targeted to lowerand middle-income Americans. A refundable tax credit is equivalent to giving each eligible citizen up to $100 annually to use for political contributions. We also present data about the relative importance of political contributions by special interests (corporate, labor and other PACs) and individuals that undermine many of the assumptions on which past reform has been based and that have not been discussed in the legal literature. The data clearly show that small contributions by individuals are the dominant source of money in campaigns, and that the influence of special interest money is subtle, appearing to “purchase” benefits like access, a place on the agenda, and minor policy details. Working from an accurate picture of who really pays for politics, and drawing from the experience at the federal and state levels with similar tax refund programs, we present the tax credit as a reform that is simple, easy to administer, and likely to improve political participation by average Americans. Thus, our proposal, unlike the complicated voucher plan with anonymity put forward by Ackerman and Ayres, is likely to be adopted by Congress; moreover, it will appeal to a bipartisan consensus because it mixes public funding with a decentralized allocation mechanism using a tax subsidy.
National governments often choose to delegate tasks and burdens to lower levels in a comprehensive system of administration. Local and regional governance thereby becomes an important factor in policy implementation. This paper focuses on the incentive problem that follows from such a delegation of competences to collect taxes and do lending at the local level in a multi-level geo-administrative system. The paper uses the Danish administrative system to illustrate the actual outcomes from such incentive problems. A two-step estimation procedure will be used to derive results on the importance of incentive problems in multi-level geo-administrative systems. Setting up elaborate administrative systems will introduce agency problems that lead to inefficiencies in both local and national governance.
Twelve years into the implementation of the Local Government Code of 1991, it is but opportune to assess how the key features of this landmark legislation has contributed to (or detracted from) achieving the balance between local autonomy and accountability. The literature on fiscal decentralization suggests that these two goals are not incompatible. In fact, real autonomy (in the sense of subnational governments being able to link their spending decisions with their revenue/tax decisions) promotes fiscal responsibility. In the context of the ongoing debate in the Philippines, however, local autonomy has been equated (by many LGUs officials) with the independence of LGUs from central government interference. As such, LGU officials have focused more on securing even higher levels of block grants in order to address the widely perceived vertical fiscal imbalance. However, closer scrutiny of the problem indicates that greater_x000D_ tax decentralization coupled with a well designed intergovernmental transfer system that includes elements of fiscal equalization and categorical grants conditional on the achievement of minimum service standards would better enhance the gains that are forthcoming from the decentralization process while minimizing the risks of macroinstability.