By: Edson Guerrero
Fiscal decentralization is the process by which transfers responsibilities and authorities related to income tax and public spending from the central government to subnational governments, granting the latter a degree of financial autonomy. In this sense, the current decentralization process in Peru n presents satisfactory characteristics and is now paralyzed. This is reflected in:
- A weak and unclear assignment of functions and powers of the three levels of government.
- The absence of a technical and reasonable estimate of the amount of resources required to effectively carry out the devolved governments regional.
- The current funding model based on central government transfers to sub-national governments, which is discretionary, unpredictable and does not promote equity between regions, in addition to hindering the development of multi-year investment plans.
The deficiencies in the Peruvian system transfers directly affect the process of institutional strengthening of subnational governments, limiting further its progress towards greater economic autonomy. Therefore, it is necessary to carry out modifications to existing funding mechanisms, in order that regional and local governments can better predict future earnings and budget allocations they receive are set out in a fair, reasonable technical.
On the other hand, the consistency with which the regulation is extremely limited municipal needs and capabilities, so if we take into account the heterogeneity among them. Thus a municipality in a rural village located in the Andes as Estiquepampa with 148 inhabitants, has the same expenditure responsibilities and revenue sources to an urban municipality located in the city of Lima and San Juan de Lurigancho which has 713 000 inhabitants.
Fiscal decentralization is the process by which transfers responsibilities and authorities related to income tax and public spending from the central government to subnational governments, granting the latter a degree of financial autonomy. In this sense, the current decentralization process in Peru n presents satisfactory characteristics and is now paralyzed. This is reflected in:
- A weak and unclear assignment of functions and powers of the three levels of government.
- The absence of a technical and reasonable estimate of the amount of resources required to effectively carry out the devolved governments regional.
- The current funding model based on central government transfers to sub-national governments, which is discretionary, unpredictable and does not promote equity between regions, in addition to hindering the development of multi-year investment plans.
The deficiencies in the Peruvian system transfers directly affect the process of institutional strengthening of subnational governments, limiting further its progress towards greater economic autonomy. Therefore, it is necessary to carry out modifications to existing funding mechanisms, in order that regional and local governments can better predict future earnings and budget allocations they receive are set out in a fair, reasonable technical.
On the other hand, the consistency with which the regulation is extremely limited municipal needs and capabilities, so if we take into account the heterogeneity among them. Thus a municipality in a rural village located in the Andes as Estiquepampa with 148 inhabitants, has the same expenditure responsibilities and revenue sources to an urban municipality located in the city of Lima and San Juan de Lurigancho which has 713 000 inhabitants.
The evolution of subnational taxation in recent years has not improved substantially. This situation demonstrates the limited capacity of own revenue of municipalities and regional governments. Therefore, and taking into account the current situation, it is necessary to increase the revenue of each subnational government to adapt its spending powers. But how?. Through fiscal responsibility.
means that there is fiscal responsibility when the subnational government revenues from tax revenues directly related to taxes paid by citizens living in that territory. Therefore, fiscal responsibility is determined by the degree of financial autonomy that subnational government has with respect to the Government.
The characteristics required for there to be fiscal responsibility, in our view are:
a) increased capacity and revenue-raising tax by subnational governments;
b) possible cover the costs of subnational governments your income;
c) that citizens are aware that their payments via tax expenditures are made in the community;
d) that citizens of each municipality and region may require political responsibility for decisions income and expenditure made by their governments.
means that there is fiscal responsibility when the subnational government revenues from tax revenues directly related to taxes paid by citizens living in that territory. Therefore, fiscal responsibility is determined by the degree of financial autonomy that subnational government has with respect to the Government.
The characteristics required for there to be fiscal responsibility, in our view are:
a) increased capacity and revenue-raising tax by subnational governments;
b) possible cover the costs of subnational governments your income;
c) that citizens are aware that their payments via tax expenditures are made in the community;
d) that citizens of each municipality and region may require political responsibility for decisions income and expenditure made by their governments.
All this means breaking the imbalance vertical, or make the districts pay their expenses with their own taxes. Consequently, in the Peruvian case, this implies the need to broaden the tax responsibilities of regional and municipal governments.
