Why Theory and Practice are Different: The Gap Between Principles and Reality in Subnational Revenue Systems
AbstractEnsuring adequate subnational revenue is a core concern of fiscal decentralization. Public finance principles for selecting and designing subnational revenue sources have been widely used during the prominent wave of decentralization efforts in developing countries over the past three decades. Available empirical literature, however, suggests that subnational revenue generation often fails to meet needs and expectations, even where normative advice has been or seems to have been followed. Are the principles inappropriate, or are they just poorly applied? This paper argues that both factors are often at play. Basic principles are valuable, but they can be challenging to use and do not cover certain critical factors. Even if the principles are relevant and well applied, implementation commonly faces powerful constraints. Yet despite unsatisfying performance, revenue system design remains substantially based on a conceptually narrow normative framework that lacks a sense of pragmatic strategy and is often overwhelmed in practice by contextual factors it fails to or only weakly considers.
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Bibliographic InfoPaper provided by International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University in its series International Center for Public Policy Working Paper Series, at AYSPS, GSU with number paper1313.
Length: 32 pages
Date of creation: 07 Apr 2013
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-05-24 (All new papers)
- NEP-HME-2013-05-24 (Heterodox Microeconomics)
- NEP-PBE-2013-05-24 (Public Economics)
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