Other Public Sector Study
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Publication
The World Bank's Support for Subnational Governance in Large Federal Countries: Lessons Learned from Argentina, Brazil and Nigeria
(World Bank, Washington, DC, 2022)Limited local tax revenue and low public sector efficiency are two critical problems of public sector management and key constraints for the economic and social development of many subnational governments in large federal countries. To create fiscal space without compromising macroeconomic stability and fiscal sustainability, there is a need for reforms that lead to better use of public resources and improved expenditure efficiency through reforms in budgeting, procurement, and tax administration. This note presents lessons learned from the World Bank’s subnational governance projects in three large federal countries - Argentina, Brazil and Nigeria - between 2008-2017. These lessons learned can be useful in shaping the design of future subnational governance projects in other federal countries, particularly those projects seeking to improve service delivery, public expenditure systems and core governance institutions. -
Publication
Promoting Competition in Local Markets in Mexico: A Subnational Application of the World Bank Group's Markets and Competition Policy Assessment Tool
(World Bank, Washington, DC, 2018-06-01)Stagnant productivity growth and high disparities in productivity levels across Mexican states have been holding back economic growth. In general, Mexico’s federal government has a solid competition policy framework in place. Subnational regulations in transport, agriculture, tourism, retail, and other sectors are holding back the potential of local economies to grow and provide consumers with affordable goods. Anticompetitive regulations for professionals such as notaries also increase the cost of doing business. The World Bank Group (WBG) was requested to address a critical gap and to pilot a reform-oriented engagement on competition policy at the subnational level. WBG engaged to motivate an actionable reform plan that can unlock competition in key markets at the local level. This note discusses the main findings of the WBG’s markets and competition policy assessment tool (MCPAT) application to various subnational governments in Mexico and the initial reform experience. It draws on the results of multiple pieces of analysis and implementation support projects since 2012 to assess, identify, prioritize, and modify regulations that restrict competition at the subnational level in key markets. This note is structured as follows: section 1 gives an introduction, section 2 discusses the international experience on the role of competition at the local level for development. Section 3 provides a brief presentation of the methodological steps of the MCPAT subnational application. Section 4 discusses incidences of anti-competitive regulation (some of which have been removed) to exemplify their harmful effect. Section 5 provides several examples of how to prioritize and design reforms based on how government interventions at the subnational level interact with particular features of subnational Mexican markets, as well as based on their feasibility and their potential effects. -
Publication
Dominican Republic Gearing Up for a More Efficient Tax System: An Assessment of Tax Efficiency, a Cost-Benefit Analysis of Tax Expenditures, and an Exploration of Labor Informality and its Tax Implications
(World Bank, Washington, DC, 2017-06)This study discusses options how to increase the Dominican Republic tax revenue and attempts to identify priority areas for efficiency-enhancing reforms. A 2016 World Bank report on Dominican fiscal policy found that the country's tax expenditures were poorly targeted and regressively distributed, benefitting the wealthy more than the poor, and imposed considerable fiscal and economic costs. The report also showed that the tax contribution of the informal sector is extremely low, despite the fact that informal workers account for roughly half of the active labor force. As the new government prepares the ‘fiscal pact' first described in the country's development strategy 2030, policymakers will require a more thorough understanding of these issues and their fiscal, economic, and distributional implications. Thus, building on past analytical work, the present study focuses on two priority areas: tax efficiency and labor informality. Chapter One reveals that the DR's strong and sustained economic growth in recent years has had only a modest impact on revenues' efficiency from value-added tax, corporate income tax, personal income tax, and minor taxes. An analysis of tax-collection efficiency reveals several feasible options for boosting tax revenues. Chapter Two explores the characteristics, correlates, and effects of widespread labor informality in the DR. Identifying the correlates of informality yield important implications for promoting formalization and thereby broadening the income-tax base. -
Publication
Peru: Building a More Efficient and Equitable Fiscal Decentralization System
(World Bank, Washington, DC, 2017-05-02)Over the past two decades, Peru has achieved remarkable economic success. Average annual Gross Domestic Product (GDP) growth has exceeded 5 percent since 2001. Poverty has been consistently reduced, and sustained improvements have been observed in social and human development. The poverty incidence rate fell from 58 to 23 percent between 2004 and 2014, and households’ incomes at the bottom 40 percent grew 50 percent faster than the national average. The structural transformation of Peru’s economy striking fast and widely shared growth transformed Peru into an upper-middle income and diversified economy. This report analyzes recent trends of the fiscal decentralization process in Peru and presents a set of reform options designed to harvest the envisaged efficiency and equity gains in service delivery that the fiscal decentralization was expected to bring. The analysis and policy options are presented in a conceptually logical order: (i) departing from institutional arrangements in the vertical structure of subnational governments passing to (ii) the need of a clearer definition of spending responsibilities among levels of government that needs to be followed by (iii) a commensurate redefinition of revenue assignments and (iv) enhancing equalization role of the transfer system. -
Publication
Lei das Agências: An Analysis of Draft Law on Regulatory Agencies
(World Bank, Washington, DC, 2017)Since 2013, a new legislation was being drafted by the Senate of Brazil, in response to the perception that the Agencies often lack financial, administrative and decision making autonomy, are subject to capture by both overt and tacit political interference, with appointees lacking the necessary skills and independence. In infrastructure, regulatory uncertainty and the resort to the court of law in matters that should normally be decided by the agencies and accepted by affected parties is particularly harmful when government faces excess (and growing) demand for infrastructure services. After being discussed and approved in two key Senate commissions, the draft law (DL) was approved unanimously by the Senate Special Commission on National Development with no need to go to the floor. The DL provides the agencies with considerable formal autonomy, being no coincidence that this is made explicit at the outset of the legislation (Article 3). While the DL provides substantial autonomy to the agencies, it also defines the mechanisms for external control and accountability in its second chapter. The fundamental reason for the support of the DL is the high degree of autonomy conferred on the agencies, guaranteeing independence of political interests, technical excellence, and greater transparency and accountability. Finally, the DL strongly encourages inter-agency cooperation, partly in response to a recurrent criticism regarding barriers facing firms when dealing with different government agencies both national and subnational. -
Publication
Colombia: Policy Strategy for Public Financial Management of Natural Disaster Risk
( 2016-10)Disasters resulting from natural hazards represent an important challenge for Colombia’s fiscal sustainability and stability. Colombia is one of the countries with the highest recurrence rate of disasters caused by natural hazards in Latin America (see the Annex)1. As the country’s population and economy continue to grow, so will the economic losses resulting from such events, an average of 600 disaster events of which is reported per year2. Colombia’s rate of economic growth is increasing the base of assets exposed to disaster risks, which may lead to significant increases in losses, particularly if investments in new assets are not accompanied by plans for mitigating disaster risk. The Government of Colombia (GoC) recognizes the importance of mitigating these events and has taken several steps to mainstream disaster risk management into its policy and programs, as evinced by the National Development Plan ‘2014-2018’, ‘all for a New Country’. The MHCP is committed to developing strategies for reducing its contingent liabilities in relation to disasters and to managing the fiscal risk resulting from these events. This document presents the priority policy objectives that have been established to assess, reduce, and manage fiscal risk due to natural disasters. It also describes the MHCP’s efforts to progress its policy objectives in the long term. These policy objectives represent the MHCP’s ex ante policy framework regarding management of financial and fiscal disaster risk. The MHCP identifies three priority policy objectives in order to strengthen management of the Government’s contingent liabilities and thus support the goal of achieving macroeconomic stability and fiscal balance. The policy objectives are: (i) identification and understanding of fiscal risk due to disasters; (ii) financial management of natural disaster risk, including the implementation of innovative financial instruments; and (iii) catastrophe risk insurance for public assets. -
Publication
Peru - Selected Issues in Fiscal Policy: Taxation and Equity
(World Bank, Washington, DC, 2015-06-11)This report takes an in-depth look, from a policy perspective, at the trade-offs between increasing tax collection and improving the equity of the fiscal system. As part of this effort, the report places the Peruvian tax system in an international context and considers the key challenges the government is facing in its drive to increase revenue. It also conducts qualitative and quantitative analyses of the impact of taxes and transfers on inequality and on the distribution of income. The report then makes several policy proposals that would increase tax collection without jeopardizing equity, and it then simulates the impacts of these changes on collection and equity. This advice spanned the 2012-2014 period, and included research on several tax policy-related issues, such as legal advice on double-taxation treaties and in-depth analyses of tax exemptions. To keep the focus tight, some of the work is not included in this report. Contributions were originally written in Spanish to provide the Ministry of Economy and Finance (MEF) with timely advice on the subject and were discussed with the counterparts during and immediately after its preparation. As a result of prioritizing this process, two teams focused on different areas of research and were able to contribute to the analytical base behind the ongoing tax reform. The report summarizes the main elements of this process and resulting advice. It comes out at the same time as the finance ministry announces the first set of tax reforms that were informed by this work.