Regional Governance and Sustainable Development: Fiscal Decentralisation in Tourism-Driven Economies

Transcription

1 Regional Governance and Sustainable Development: Fiscal Decentralisation in Tourism-Driven Economies Presentation by: Division for Public Economics and Public Administration UNDESA Prep-com for the International Conference on Financing for Development, Side event on Capacity building for fiscal management, macro policy making and entrepreneurship in developing countries, New York, 18 January 2002

2 Three topics for presentation: 1. Why DPEPA? 2. Why fiscal decentralization? 3. Why Quintana Roo, Mexico? 2

3 1. Why DPEPA? Division for Public Economics and Public Administration (DPEPA) as a UN center of excellence on all matters related to building and perfecting public space within societies. In this area, we: - Create knowledge - Adapt knowledge - Manage and disseminate knowledge 3

4 DPEPA: Public Economics Group Global economic regimes Economic aspects of decentralisation and federalism Entrepreneurial development Corporate governance 4

5 DPEPA: Public Resources Mobilisation and Management Group Domestic fiscal policy International co-operation in tax matters Budget reform and management Public accounting Auditing Fiscal transparency and accountability 5

6 Main credentials of UNDESA/DPEPA in matters related to taxation: Manual for the Negotiation of Bilateral Tax Treaties [Published in Revised version due in 2002.] United Nations Model Double Taxation Convention [Published in 1980 and revised in June By 1997 it was used in 811 cases: 697 times by developing countries, 114 times by OECD countries] Facilitating negotiations of bilateral treaties on double taxation, especially for the LDCs 6

7 2. Why fiscal decentralization? Changes in fiscal landscape the world over: in profile of taxpayers in volume and pattern of public expenditures in environment for tax revenue generation in tax policy in modus operandi of governments 7

8 Profile of taxpayers: Public space increasingly populated by citizens - voters - consumers: educated, skilled, networked, multi-dimensional, mobile, conscious of their rights, aware of their needs, ready for civic activism. Two profiles of taxpayers emerge: captive taxpayers - individuals who are relatively less educated, poorer, attached to immobile factors of production, e.g. land; businesses locked within a local market; mobile taxpayers - individuals who are free to move (attached to mobile factors of production, e.g. developed human intellect) and can include local tax rate in the menu of factors that determine their decisions about location; and, TNCs. 8

9 Volume and pattern of public expenditure: 1. Economies that globalize tend also to experience the fastest growth in public expenditure and in tax revenue [as a proportion of GDP] needed to finance this expenditure. 2. Among three main goals of their public budgets: stabilization, ( full employment and low, stable inflation rate) redistribution, (social safety net, corporate welfare) and, investment in future growth and development, (market-augmenting public goods, human development) the third component is most pronounced and absorbs a growing share of public resources. 9

10 Features of evolving environment Some old: for tax revenue generation: Wrong policies, weak administrations = tax avoidance; tax evasion; Mobility of taxpayers = tax competition; transfer pricing; tax havens; Some new: Internet = dematerialization of products; disappearance of a fixed place of business; tax avoidance via e-money; difficulty to apply VAT in transborder trading; the business profit vs. royalties on copy right dilemma; and no doubt many more, yet unknown; New financial instruments = difficulty to define income. 10

11 Tax policy, tax administration: Motto: Effective tax administration is an integral part of effective tax policy: the latter is meaningless without the former. As a reaction to changes in fiscal landscape, ideally, a shift should occur towards: revenue collection close to beneficiaries of public spending; fairness, simplicity, transparency, efficiency; lowering tax rates, widening tax base; consumption [and environment] taxes, and away from income taxes; administrative and political autonomy of tax administrations. 11

12 Evolving modus operandi of governments: Crisis of government legitimacy in the world. Evolution of governments: Stage one - constructing government machinery (to protect the public sphere from private interests) Stage two - efficiency and effectiveness revolution (to deliver without major economic distortions) Stage three - assuring transparency and accountability (to establish legitimacy based on informed consensus of citizenry) 12

13 The promise of fiscal decentralization: General framework for fiscal decentralization: less dependency on central government revenues; freedom to directly raise revenues (local taxes, borrowing); greater responsibility for spending programs; greater responsibility for macroeconomic stability. The promise: greater local community ownership of the whole fiscal system; greater congruence of spending programs with local needs and demands; higher quality of public services. 13

14 Some of the many things that can go wrong: Central authorities detest decentralization and oppose it by maintaining suffocating control; Central authorities under-control decentralization (lump sum transfers into local institutional framework unable to provide efficiency and effectiveness and/or unwilling to adhere to transparency and accountability principles); Decentralization tied to deficit funding (local or central); Chronically underdeveloped local (tax) revenue base, i.e. decentralization that depends totally on central transfers; Local fiscal policy that distorts macroeconomic equilibrium (locally or centrally). 14

15 Conditions that may make the promise come true: Institutional and transactional cost of multiplying tax jurisdictions lower than that of benefits; Simple, transparent formula for intergovernmental fiscal transfers; As needed, conditionality of transfers tied to provision of services; Central oversight / audit and accountability for transferred funds; Local transparency and accountability framework; Local tax policy and tax administration that matches best standards; Local access to long-term development funding; No public ownership of commercial banks; Local consideration of local and national macroeconomic consequences of local fiscal activities; Central bank independence; No central bailout of local fiscal failures. 15

16 3. Why Quintana Roo? Chance for knowledge creation, as: QR is a province in a federal state that has recently renewed the effort to give new life to federalism; QR is a province with one potentially rich source of tax revenue and that raises the issue of intergovernmental transfers and equity as well as economic diversification; At the same time, QR suffers from internal growth and development disparities; QR is a province with huge needs in the area of development funding and that raises issues of macroeconomic stability, central oversight and just in case bail-out mechanisms; QR moves into fiscal decentralization with obvious needs for strengthening local institutions for efficiency, effectiveness, transparency, accountability. 16

17 The International Colloquium: Venue: Cancun, QR, Mexico Dates: February 2002 Focus: Fiscal decentralization, entrepreneurial development, natural resources management, management of cultural interaction. Participants: Mexican officials from local and central level; experts; representatives of 12 countries / regions in the South or in economies in transition that face similar development situations; representatives of regions from the North in similar development situations; representatives of relevant international organizations. 17

18 Source of information: About preparations for the Colloquium About results of the Colloquium 18