INTERGOVERNME NTAL FISCAL TRANSFERS ROY BAHL Regents Professor of Economics, Emeritus Georgia State University September, 2015 Manila External Support.

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Presentation transcript:

INTERGOVERNME NTAL FISCAL TRANSFERS ROY BAHL Regents Professor of Economics, Emeritus Georgia State University September, 2015 Manila External Support for Decentralization Reforms & Local Governance Systems in the Asia Pacific: Better Performance, Higher Impact?

JUSTIFICATIONS FOR TRANSFERS Vertical Fiscal Imbalance Regional Service Level Disparities Spillovers National Priorities Political Control Bureaucratic Protection

HOW TO STRUCTURE A TRANSFER SYSTEM Vertical Sharing Tax shares Ad Hoc Cost Reimbursement Horizontal Sharing Derivation Formula Cost reimbursement Ad Hoc

H/VSHARED TAXAD HOCCOST REIMBURSEM ENT DERIVATIONCHINA, INDONESIA, CAMBODIA(p) FORMULAINDONESIA PHILIPPINES INDIA (FC) PAKISTAN Cambodia (d, c) India (Schemes) AD HOC COST REIMBURSEM ENT CambodiaIndonesia Intergovernmental Transfer Structures in Asia

CONDITIONAL VS. UNCONDITIONAL GRANTS Determining the Amounts to Transfer? Monitoring the Outcomes? Empowering SNGs or Line Ministries? Designing a Horizontal Distribution

CONDITIONAL OR UNCONDITIONAL TRANSFERS ImpactConditional transferUnconditional Transfer Fiscal DecentralizationWeakensStrengthens Compliance and Administrative costs Higher, especially if large number of conditional grants Lower TransparencyLess, if there are numerous conditions and distributions More Providing IncentivesBetter, because there are more tools, e.g., matches, rules for use of the funds; displacement Worse: weak incentives for revenue mobilization might be provided in the formula Can Address SpilloversYesNo Can Support central Policy Directions Yes, except decentralization No, except decentralization Supports budget planningNot if the appropriation changes each year, or the conditions change Yes, if the vertical shares and formulae do not change so often.