PREM Notes

176 items available

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http://hdl.handle.net/10986/9424

This note series is intended to summarize good practices and key policy findings on poverty reduction and economic management (PREM) topics.

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Estimating Financing Needs for Local Services in Madagascar

(World Bank, Washington, DC, 2003-11) Fengler, Wolfgang ; Wietzke, Frank Borge

This note presents the methodology and findings of a field study on the financing needs of Madagascar's communes-the country's lowest but most institutionally advanced level of subnational government. Following a first round of municipal elections in 1995, more than 1,500 communes are now formally responsible for maintaining basic administrative services and social and economic infrastructure, including local waste disposal and sanitation. In addition, communes are responsible for identifying and coordinating local investments and for supporting implementation of the national Poverty Reduction Strategy at the local level. To finance these activities, communes receive population-based transfers and small conditional transfers, and can collect revenue from property, market, and consumption taxes as well as user charges. Yet little is known about how much these fiscal assignments satisfy local needs. As part of its policy dialogue with the government of Madagascar, the World Bank is engaged in extensive research that includes geographic mapping of social spending and a review of opportunities and obstacles to fiscal and sectoral decentralization. This research generated the following analysis of local and cross-sectoral service needs and available financing.
Why Worry About Tax Expenditure?

(World Bank, Washington, DC, 2003-01) Swift, Zhicheng Li ; Cavalcanti, Carlos B.

Tax expenditures are concessions that fall outside tax norms or benchmarks. These norms include accounting conventions, the structure of tax rates, the deductibility of compulsory payments, provisions to facilitate tax administration, and norms related to international fiscal obligations. Tax expenditures are deviations from these norms, implemented to encourage behavior deemed desirable by policymakers, and can take a number of forms-including tax exemptions, allowances, credits, deferrals, and relief (see OECD 1996). The classic example is a tax deduction for charitable contributions, where the reduction in tax revenue is more than offset by the increase in support for charitable activities. Tax expenditures are not a free lunch, however. They can lead to inefficiencies and inequities, stimulating no additional activity and making the tax regime more regressive. For instance, a tax concession granted to employers who hire unskilled workers might go to employers who would have hired such workers anyway. Tax expenditures also affect government budgets, because they imply forgoing revenue that could be used to fund direct government expenditures.
Lessons from Armenia's Institutional and Governance Review

(World Bank, Washington, DC, 2002-12) Mukherjee, Amitabha ; Shahzadeyan, David

Institutional and Governance Reviews (IGRs) are a new tool in the Bank's package of analytical and advisory activities (see PREMnote 75). Because they are politically sensitive, the development of these reviews involves careful tradeoffs. Though each requires thorough analysis of a country's institutional shortcomings, the final product must be acceptable to country authorities and other development partners. To be credible and acceptable, an IGR must reflect extensive participation by a variety of national stakeholders. In Armenia the Bank's IGR team engaged the government (executive, legislature, judiciary), civil society (nongovernmental organizations, political parties, trade unions, academics), and other development partners from the outset. This approach resulted in widespread acceptance of the report's analysis and recommendations within both Armenia and the Bank. Armenia's IGR was a pioneering effort by the Bank's Europe and Central Asia Region to systematically evaluate a country's public institutions and develop a program of reforms supported by follow-up operations. The IGR had two main objectives. First, it was to diagnose institutional dysfunction at the national level using quantitative benchmarks of performance. Second, it was to assess political realities and constraints to reform, to foster the sustainability of Bank operations. Armenia was chosen for several reasons. There was a dearth of analytical work on public sector institutional reforms prior to 1998. Moreover, country authorities evinced keen interest in an IGR-and were matched by strong support from the Bank's country unit and team..
Institutional and Governance Reviews : A New Type of Economic Sector Work

(World Bank, Washington, DC, 2002-11) Levy, Brian ; Manning, Nick

In 1999 the Bank began conducting Institutional and Governance Reviews (IGRs), adding to its tools for economic and sector work. IGRs trace the institutional roots of weak government performance and offer practical recommendations for improving government operations and development strategies. The 13 IGR products generated so far have varied considerably -reflecting differences in the performance problems addressed, the stage of the dialogue between the Bank and the country being assessed, and the resources available to the Bank's country teams. A recent assessment of the Bank's experience with Poverty Reduction Strategy Papers recommends that countries undertake IGRs early in the process of producing those papers. In addition, the Bank's Task Force on Low-income Countries Under Stress recommends that IGRs be conducted to build knowledge and capacity in such countries. IGRs have several distinctive features. They assess performance failures empirically, using surveys and quantitative measures whenever possible. They encourage the development of standardized tools and other modular approaches that help maintain quality at reasonable cost. And most important, they analyze the feasibility of reform recommendations by considering political realities and potential constraints.
Strengthening Oversight by Legislatures

(World Bank, Washington, DC, 2002-10) Manning, Nick ; Stapenhurst, Rick

About 90 percent of the world's nearly 200 sovereign states have national legislatures or parliaments. With the spread of democracy and the rise of multiparty political systems, these bodies are playing larger roles in government. Increasingly, legislatures and their members perform four important functions of governance: o Making policies and laws. Legislatures are representative bodies for collective decisionmaking, working with the executive branch to deliberate policies and make laws. Representing citizens. Legislators give voice to individual citizens, civil society organizations, and business groups, representing the needs of local constituents in policymaking. Overseeing the executive. Legislatures oversee policy implementation by the executive branch, scrutinizing its work and holding it accountable. Recruiting future leaders. Legislatures are stepping stones and training grounds for senior positions in the executive branch. Transcending these formal functions, legislatures also provide an arena where competing political forces can debate and reach consensus on national policies and laws. This note addresses the oversight function because of its significance for government transparency and accountability, and because the Bank has initiated pilot projects to support this function.
Thailand's Hurdle Approach to Budget Reform

(World Bank, Washington, DC, 2002-08) Dixon, Geoffrey ; Dorotinsky, Bill

The note shows how Thailand's efforts to ease budget controls, can complement efforts to strengthen the capabilities of government agencies. The country's budget reform strategy, while seeking to retain the benefits of tight central control, aims at avoiding its costs, by transferring control over budget details, from the Bureau of the Budget to spending agencies, making them more responsible for managing their budget allocations, and accountable for achieving better results. This approach strengthens agency management, avoids corruption, and provides incentives for agencies to improve their management, rewarded by increased financial autonomy. However, such approach increases the risk of stalled budget reform, if agencies prolong the approach standards, or if agencies are reluctant to agree to an understanding. Although Thailand's budget reform is not yet finalized, lessons indicate the need for stronger political will, since bureaucracy in the country, enjoys far more power relative to the executive, than in many other countries; the complexity of the Thai budget reform approach could have been simplified, by increasing awareness of the need for good financial management, and by a computer-based accounting system that would meet basic financial control, and reporting standards; and, that inputs from international consultants should have been integrated with budget reform efforts.
Monitoring Fiscal Risks of Subnational Governments

(World Bank, Washington, DC, 2002-03) Ma, Jun ; Polackova, Hana

Growing experience with decentralization indicates that a country's public finance system suffers when subnational governments expose themselves to excessive risk. But central governments often lack the information needed to monitor the fiscal risks of subnational governments. Several countries, having experienced subnational fiscal crises, have established systems to monitor such risks. These systems assess subnational fiscal health and call for central government attention-and possible intervention-if preset indicators of fiscal imprudence are exceeded. In developing countries such systems also provide useful information for subnational credit ratings. This note describes several country experiences with indicators of subnational fiscal risks, identifies some limitations of such indicators, and suggests alternative indicators.
Strengthening Legislatures : Implications from Industrial Countries

(World Bank, Washington, DC, 2002-03) Messick, Richard E.

With more developing and post-communist states embracing democracy, improving the performance of their congresses, parliaments, and other legislative assemblies has become a must. These bodies make laws, hold the executive branch accountable, and represent citizen interests. Good governance demands that each of these tasks be done well. Thus aid agencies have begun supporting programs that train legislators and their staff, provide computers and buildings, and otherwise strengthen the legislative branch of government. But while some programs have succeeded, the overall results have been disappointing. One reason is that many programs have ignored a key principle of public sector reform: success requires changing the incentives facing public officials (World Bank 2000). More effective legislative aid programs will require donors to understand what motivates legislators and how those incentives can be altered. This note surveys the main factors shaping incentives for legislators in industrial countries and suggests how these factors can inform legislative reform in developing and transition economies.
Introducing a Value Added Tax : Lessons from Ghana

(World Bank, Washington, DC, 2001-12) Chapman, Emma

In 1998 Ghana's government successfully introduced a value added tax (VAT). But this success followed a failed attempt in 1995, when the country's first VAT was repealed after just three and a half months. Ghana's experience provides several lessons for the successful introduction of a VAT-particularly the importance of recognizing public sensitivity to changes in the tax system and of securing public acceptance when introducing a VAT. A VAT's introductory rate has a big influence on public opinion, but so do public education and management of public expectations. In addition, political commitment- in terms of both an enabling macroeconomic environment and the enactment of legislation-is crucial for securing popular support and ensuring the timely introduction of a VAT.
Strengthening Peru's Tax Agency

(World Bank, Washington, DC, 2001-11) Taliercio, Robert ; Engelschalk, Michael

The reforms were remarkably successful: by 1997 internal tax revenue had recovered to 13 percent of GDP-despite an extremely difficult political and economic environment-and 90 percent of large corporate taxpayers surveyed believed that taxpayer services had improved. The reforms had several key elements: granting the National Tax Administration Superintendency (SUNAT) meaningful administrative and financial autonomy, implementing radical personnel reform, investing in infrastructure and information technology, and generating public support. The reforms also forged a new relationship between taxpayers and the tax agency and committed to improving services. At the same time, the agency made clear its intention to enforce compliance with the tax code. SUNAT's experience offers several lessons for tax administration reform in other countries. First, the immediate efficacy of SUNAT as a semiautonomous revenue authority was due to a combination of several factors, perhaps the most important of which was a coupling of political leadership with managerial expertise. But Peru's experience also highlights pitfalls to avoid for other countries engaging in tax administration reform.