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intergovernmental transfers in Peru

Another mechanism for local funding are intergovernmental transfers. Often local government revenues are insufficient, is the main reason for the existence of intergovernmental fiscal transfers, in this case the central government has a greater chance of recovery and therefore reflects a centralized collection and decentralization of expenditure This implies that the local fiscal capacity (income) depends solely on the local tax base.

This means that national government transfer resources to regional and local governments, for two reasons efficiency and equity , first applies the relative efficiency has central administration in the collection of taxes, for the most efficiency by local governments in the provision of local public goods and services.

central government transfers can take various forms:

1. unconditional transfers, these transfers may be granted to local governments without any conditions regarding their use. Transfers of this type are particularly appropriate when it comes to helping the authorities with limited resources.

central government transfers are

a. Municipal Compensation Fund (FONCOMUN)

E l FONCOMUN was crafted mainly compensatory, seeking a better homogeneity in the economic base of municipalities and promote investment in different municipalities in the country, prioritizing the allocation to rural and marginal urban areas. This background is caused by a number of charges created and administered by the National Government in favor of municipalities.

This transfer is the following resources:

· The performance of municipal promotion tax.

· tax yield to the shooting.

· The tax on pleasure boats.

· The percentage of 25% tax to the betting.

Of the funds levied by municipalities for the FONCOMUN are used entirely for the purposes determined by the local governments agreed to by the council and according to their own needs. For this, the council must set annually the use of these resources for current spending rates and investments, determining appropriate levels of responsibility.

b) Customs Revenue

resources Customs Income, is income tax collected from imports or tariffs , for each of the customs.

2. Conditional transfers , these transfers in Peru are confined to capital expenditure and social programs. The restrictive conditions may take other forms: control over how the money transfer, restrictions on the type, level and quality of service provided; control of municipal spending in the service.

a) Milk Glass Program

With this transfer, the municipalities act as agents of national government in the provision of food aid, along with the demographic advantage of their benefits inherent identification of beneficiaries. This transfer is done monthly to municipalities for use in the VDL.

b) Canon and Canon

transfers by way of Canon constitute remuneration for the exploitation of natural resources located within the jurisdictions of local governments.

These transfers are conditional be used exclusively to finance or co-financing of projects or infrastructure at regional and local levels, respectively, for which established an account designated for this purpose. Regional governments will deliver on 20% (twenty percent) of total royalties received by public universities in his district, exclusively for investment in scientific research and technology to enhance regional development.

With regard to the distribution of the tax, the law states:

a) The distribution of oil royalties maintains current conditions distribution.

b) The fee is distributed among regional and local governments according to the distribution rates set by the Ministry of Economy and Finance, taking into account population and poverty criteria linked to the lack of basic needs and infrastructure deficit . Their distribution is as follows:

1. 10% of the total collected for the municipality or municipal district is located where the natural resource.

2. 25% of the total collected for governments local province or provinces where the natural resource is located, excluding the producing district or districts.

3. 40% of the total collected for local government department or departments of the regions, excluding the province or provinces where the natural resource.

4. 25% of the total collected for the regional governments where the natural resource.