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Sub-national Revenue Mobilization in Peru

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Abstract

This paper analyses the problem of sub-national revenue mobilization in Peru and proposes several policy reforms to improve collection performance while maintaining a sound revenue structure. We analyze the current revenues of regional and municipal governments and identify the main priorities of reform. Among the most important problems are the acute inequalities and inefficiencies associated with the revenue sharing from extractive industries. These revenues represent a significant share of sub-national budgets and currently they are distributed without consideration of the relative expenditure needs or fiscal capacity of sub-national units. In order to address this problem we propose the incorporation of a measure of fiscal capacity in the formula of the FONCOMUN, the municipal equalization transfer program. Other reforms explored include the reassignment of revenue sources between municipal provincial and district governments and the assignment of new taxes to regional governments.

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  • Gustavo Canavire-Bacarreza & Jorge Martinez-Vazquez & Cristian Sepúlveda, 2012. "Sub-national Revenue Mobilization in Peru," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1209, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    • Handle: RePEc:ays:ispwps:paper1209
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    7. Ehtisham Ahmad & Mercedes García-Escribano, 2011. "Constraints to Effective Fiscal Decentralization in Peru," Chapters, in: Jorge Martinez-Vazquez & François Vaillancourt (ed.), Decentralization in Developing Countries, chapter 5, Edward Elgar Publishing.
    8. Bailey, Stephen J & Connolly, Stephen, 1998. "The Flypaper Effect: Identifying Areas for Further Research," Public Choice, Springer, vol. 95(3-4), pages 335-361, June.
    9. Aragon, Fernando & Gayoso, Vilma, 2005. "Intergovernmental transfers and fiscal effort in Peruvian local governments," MPRA Paper 2108, University Library of Munich, Germany.
    10. Christian von Haldenwang, 2010. "Taxation, Fiscal Decentralisation and Legitimacy: The Role of Semi-Autonomous Tax Agencies in Peru," Development Policy Review, Overseas Development Institute, vol. 28(6), pages 643-667, November.
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    13. Giorgio Brosio & Ehtisham Ahmad, 2008. "Political Economy of Multi-Level Tax Assignments in Latin American Countries; Earmarked Revenue Versus Tax Autonomy," IMF Working Papers 2008/071, International Monetary Fund.
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    1. Agüero, Jorge M. & Balcázar, Carlos Felipe & Maldonado, Stanislao & Ñopo, Hugo, 2021. "The value of redistribution: Natural resources and the formation of human capital under weak institutions," Journal of Development Economics, Elsevier, vol. 148(C).
    2. Maldonado, Stanislao, 2014. "The Non-Monotonic Political Effects of Resource Booms," MPRA Paper 85649, University Library of Munich, Germany, revised 18 Dec 2017.
    3. Vicente Fretes Cibils & Teresa Ter-Minassian & J. Sebastián Scrofina & Federico Ortega & Germán Ríos & Alejandro Rasteletti & Arturo Ramírez Verdugo & Emilio Pineda & Jorge Martínez-Vázquez & Cristián, 2015. "Decentralizing Revenue in Latin America: Why and How (Executive Summary)," IDB Publications (Books), Inter-American Development Bank, number 88387 edited by Vicente Fretes Cibils & Teresa Ter-Minassian, February.
    4. Norman V. Loayza & Jamele Rigolini & Oscar Calvo-González, 2014. "More Than You Can Handle: Decentralization and Spending Ability of Peruvian Municipalities," Economics and Politics, Wiley Blackwell, vol. 26(1), pages 56-78, March.
    5. Jorge Martinez-Vazquez, 2013. "Fiscal Decentralization in Peru: A Perspective on Recent Developments and Future Challenges," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1324, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    6. Fretes Cibils, Vicente & Ter-Minassian, Teresa & Scrofina, J. Sebastián & Ortega, Federico & Ríos, Germán & Rasteletti, Alejandro & Ramírez Verdugo, Arturo & Pineda, Emilio & Martínez-Vázquez, Jorge &, 2018. "Decentralizing Revenue in Latin America: Why and How (Executive Summary)," IDB Publications (Books), Inter-American Development Bank, number 6829, February.
    7. Barja Daza, Gover & Villarroel Böhrt, Sergio & Zavaleta Castellón, David, 2013. "Institutional Design and Implicit Incentives in Bolivia's Decentralization Model," Revista Latinoamericana de Desarrollo Economico, Instituto de Investigaciones Socio-Económicas (IISEC-UCB), Universidad Católica Boliviana, issue 19, pages 137-211, Mayo.
    8. Baja Daza, Gover & Villarroel Böhrt, Sergio & Zavaleta Castellón, David, 2012. "Diseño institucional e incentivos implicitos en la descentralización Boliviana (1994-2008) [Institutional design and implicit incentives in Bolivia's decentralization model (1994-2008)]," MPRA Paper 48598, University Library of Munich, Germany.
    9. Roy Bahl & Richard M. Bird, 2014. "Decentralization and Infrastructure: Principles and Practice," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1408, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    10. James Alm, 2015. "Financing Urban Infrastructure: Knowns, Unknowns, And A Way Forward," Journal of Economic Surveys, Wiley Blackwell, vol. 29(2), pages 230-262, April.

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    More about this item

    Keywords

    revenue mobilization; fiscal decentralization; Peru;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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