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The new fiscal federalism in Brazil

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Author Info

  • Shah, A.

Abstract

Brazil is a three-tiered federation of 24 states, two federal territories, a federal district, and 4,300 municipalities. In 1989 less than half of all government spending was controlled by the federal government. Brazil's new constitution gave autonomous broad powers to states and municipalities on certain tax and spending functions, with municipalities independent of and coequal to states. This paper reviews and analyzes the intergovernmental fiscal relations in Brazil and finds that: (a) federal and state governments are involved in purely local functions in an uncoordinated fashion; (b) the administration of sales tax by all three levels creates duplication and confusion; (c) administration of the general value-added tax by the state involves unresolved issues about tax crediting on interstate trade; (d) the state and municipal revenue-sharing funds do not distribute revenues fairly and equitably; (e) conditional transfers are arbitrary and driven primarily by political considerations; and (f) revenue-sharing constrains the federal government's ability to fulfill its mandate as a national government and is conducive to fiscal mismanagement. In short, the paper concludes that fiscal arrangements have created a vertical fiscal imbalance. The author presents policy options to resolve these problems.

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Bibliographic Info

Paper provided by World Bank in its series World Bank - Discussion Papers with number 124.

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Length: 130 pages
Date of creation: 1991
Date of revision:
Handle: RePEc:fth:wobadi:124

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Related research

Keywords: expenditures ; taxes;

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References

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  1. Anwar M. Chaudry-Shah, 1989. "A Capitalization Approach to Fiscal Incidence at the Local Level," Land Economics, University of Wisconsin Press, vol. 65(4), pages 359-375.
  2. Chaudry-Shah, Anwar, 1988. " Capitalization and the Theory of Local Public Finance: An Interpretive Essay," Journal of Economic Surveys, Wiley Blackwell, vol. 2(3), pages 209-43.
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Citations

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Cited by:
  1. Shah, Anwar, 1991. "Perspectives on the design of intergovernmental fiscal relations," Policy Research Working Paper Series 726, The World Bank.
  2. Anwar Shah, 2006. "Fiscal decentralization and macroeconomic management," International Tax and Public Finance, Springer, vol. 13(4), pages 437-462, August.
  3. Bird, Richard & Wallich, Christine, 1992. "Financing local government in Hungary," Policy Research Working Paper Series 869, The World Bank.
  4. Frederico G. Jayme Jr. & Marco Crocco, 2005. "Política Fiscal, Disponibilidade De Crédito E Financiamento De Políticas Regionais No Brasil (Versão Preliminar Para Discussão)," Working Papers 0016, Universidade Federal do Paraná, Department of Economics.
  5. David Wildasin, 1996. "Introduction: Fiscal Aspects of Evolving Federations," International Tax and Public Finance, Springer, vol. 3(2), pages 121-135, May.
  6. Eduardo Haddad & Alexandre A. Porsse & Eduardo P. Ribeiro, 2006. "Modeling Interjurisdictional Tax Competition in a Federal System," ERSA conference papers ersa06p359, European Regional Science Association.
  7. Verônica Inês Fernandez Orellano & Verônica Inês Fernandez Orellano & Fabiana Rocha & Enlinson Henrique Carvalho De Mattos & Ana Carolina Pereira Zoghbi, 2011. "Descentralização Fiscal Emunicipalização Do Ensino Fundamental: Impactos Sobre Os Indicadores Dedesempenho Educacional," Anais do XXXVIII Encontro Nacional de Economia [Proceedings of the 38th Brazilian Economics Meeting] 069, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  8. Sergey Sinelnikov & Pavel Kadochnikov & Ilya Trunin & Sergey Chetverikov & Marianne Vigneault, 2006. "Fiscal Federalism in Russia: Soft Budget Constraints of Regional Governments," Published Papers 47, Gaidar Institute for Economic Policy, revised 2012.
  9. Affonso, Rui de Britto Alvares, 2000. "Descentralização e reforma do Estado: a Federação brasileira na encruzilhada," Revista Economia e Sociedade, Instituto de Economia, Universidade Estadual de Campinas (UNICAMP), vol. 14, pages 26, January.
  10. Shah, Anwar, 2005. "Fiscal decentralization and fiscal performance," Policy Research Working Paper Series 3786, The World Bank.
  11. Sergey Sinelnikov & Pavel Kadochnikov & Ilya Trunin (ed.), 2006. "Fiscal Federalism in Russia: Soft Budget Constraints of Regional Governments," Books, Gaidar Institute for Economic Policy, edition 1, number 4, June.
  12. Shah, Anwar, 2005. "A framework for evaluating alternate institutional arrangements for fiscal equalization transfers," Policy Research Working Paper Series 3785, The World Bank.
  13. Velasco, Andres, 2000. "Debts and deficits with fragmented fiscal policymaking," Journal of Public Economics, Elsevier, vol. 76(1), pages 105-125, April.
  14. Rafael Gamboa, 1998. "Conditional Transfers to Promote Local Government Participation in Mexico," Economia Mexicana NUEVA EPOCA, , vol. 0(2), pages 189-227, July-Dece.

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