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Sub-national Revenue Mobilization in Peru

Author

Listed:
  • Gustavo Canavire-Bacarreza
  • Jorge Martinez-Vazquez
  • Cristian Sepulveda

Abstract

This paper analyzes the problem of sub-national revenue mobilization in Peru and proposes several policy reforms to improve collection performance while maintaining a sound revenue structure. In particular, the paper analyzes the current revenues of regional and municipal governments and identifies the main priorities for reform. Among the most important problems are the acute inequalities and inefficiencies associated with 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, the paper proposes the incorporation of a measure of fiscal capacity into 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.

Suggested Citation

  • Gustavo Canavire-Bacarreza & Jorge Martinez-Vazquez & Cristian Sepulveda, 2012. "Sub-national Revenue Mobilization in Peru," Research Department Publications 4768, Inter-American Development Bank, Research Department.
  • Handle: RePEc:idb:wpaper:4768
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    References listed on IDEAS

    as
    1. Richard M Bird & Andrey V Tarasov, 2004. "Closing the Gap: Fiscal Imbalances and Intergovernmental Transfers in Developed Federations," Environment and Planning C, , pages 77-102.
    2. Roy Bahl & Musharraf Cyan, 2011. "Tax assignment: does the practice match the theory?," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 29(2), pages 264-280, April.
    3. Ehtisham Ahmad & Mercedes García-Escribano, 2011. "Constraints to Effective Fiscal Decentralization in Peru," Chapters,in: Decentralization in Developing Countries, chapter 5 Edward Elgar Publishing.
    4. 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.
    5. Aragon, Fernando & Gayoso, Vilma, 2005. "Intergovernmental transfers and fiscal effort in Peruvian local governments," MPRA Paper 2108, University Library of Munich, Germany.
    6. 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.
    7. Jorge Vega Castro, 2008. "Análisis del proceso de descentralización fiscal en el Perú," Documentos de Trabajo / Working Papers 2008-266, Departamento de Economía - Pontificia Universidad Católica del Perú.
    8. Jorge Martinez-Vazquez & Andrey Timofeev, 2005. "Choosing between Centralized and Decentralized Models of Tax Administration (2005)," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0502, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    9. Wallace E. Oates, 1968. "The Theory of Public Finance in a Federal System," Canadian Journal of Economics, Canadian Economics Association, vol. 1(1), pages 37-54, February.
    10. Ehtisham Ahmad & Mercedes Garcia-Escribano, 2006. "Fiscal Decentralization and Public Subnational Financial Management in Peru," IMF Working Papers 06/120, International Monetary Fund.
    11. Giorgio Brosio & Ehtisham Ahmad, 2008. "Political Economy of Multi-Level Tax Assignments in Latin American Countries; Earmarked Revenue Versus Tax Autonomy," IMF Working Papers 08/71, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. 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.
    2. Agüero, Jorge M. & Balcázar, Carlos Felipe & Maldonado, Stanislao & Ñopo, Hugo, 2017. "The value of redistribution: natural resources and the formation of human capital under weak institutions," Avances de Investigación 0028, Grupo de Análisis para el Desarrollo (GRADE).
    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. 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.
    5. 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, pages 56-78.
    6. repec:idb:idbbks:6829 is not listed on IDEAS
    7. 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.
    8. 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), Universidad Católica Boliviana, issue 19, pages 137-211, Mayo.

    More about this item

    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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