A Practitioner’s Guide to Intergovernmental Fiscal Transfers

Intergovernmental fiscal transfers are a dominant feature of subnational finance in most countries. They are used to ensure that revenues roughly match the expenditure needs of various orders (levels) of subnational governments. They are also used to advance national, regional, and local area object...

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Bibliographic Details
Main Author:	Shah, Anwar
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2012
Subjects:	ALLOCATION CRITERIA ASSIGNMENT OF RESPONSIBILITIES BUDGET CONSTRAINTS BUDGETARY ALLOCATIONS BUDGETARY AUTONOMY BUDGETARY FLEXIBILITY CAPITA INCOME CAPITAL EXPENDITURES CAPITAL OUTLAYS CENTRAL GOVERNMENT COMPETITIVE SERVICE DELIVERY CORPORATE INCOME CORPORATE INCOME TAX DEFICITS DISTRIBUTIONAL EQUITY ECONOMIC EFFICIENCY EQUALIZATION EQUALIZATION TRANSFERS EQUITY OBJECTIVES EXPENDITURE AREA EXPENDITURE NEEDS EXPENDITURE RESPONSIBILITIES EXTERNALITIES FINANCIAL ACCOUNTABILITY FINANCIAL REPORTING FISCAL CAPACITIES FISCAL CAPACITY FISCAL CAPACITY EQUALIZATION FISCAL DECENTRALIZATION FISCAL DISPARITIES FISCAL EQUALIZATION FISCAL EQUALIZATION PROGRAM FISCAL EQUALIZATION TRANSFERS FISCAL GAP FISCAL GAPS FISCAL HEALTH FISCAL MANAGEMENT FISCAL NEED FISCAL RELATIONS FISCAL SITUATION GOVERNMENT ACCOUNTABILITY GOVERNMENT BUDGET GRANT DESIGNS GRANT PROGRAMS GROSS DOMESTIC PRODUCT GROSS INCOME HORIZONTAL EQUITY INFLATION INSTITUTIONAL ARRANGEMENTS INSTITUTIONAL ECONOMICS INTERGOVERNMENTAL FINANCE INTERGOVERNMENTAL FISCAL TRANSFERS INTERGOVERNMENTAL TRANSFERS LEVEL OF GOVERNMENT LEVELS OF GOVERNMENT LOCAL AUTHORITIES LOCAL AUTONOMY LOCAL BUDGET LOCAL COMMUNITY LOCAL FISCAL BEHAVIOR LOCAL GOVERNMENT LOCAL GOVERNMENT AUTONOMY LOCAL GOVERNMENTS LOCAL OFFICIALS LOCAL OWNERSHIP LOCAL RESIDENTS LOCAL SELF GOVERNMENT LOCAL SERVICE PROVISION LOCAL SPENDING LOCAL TAXPAYERS LOCAL TRANSFERS MACROECONOMIC STABILITY MATCHING GRANTS MINISTRY OF FINANCE MUNICIPALITIES NATIONAL GOVERNMENT NATIONAL MINIMUM STANDARDS NATIONAL OBJECTIVES NATIONAL TAX NATIONAL TAX BASE PER CAPITA INCOME PERSONAL INCOME PRIVATE GOODS PROVISIONS PUBLIC PUBLIC GOODS PUBLIC GOVERNANCE PUBLIC MANAGEMENT PUBLIC MANAGER PUBLIC MANAGERS PUBLIC OFFICIALS PUBLIC SECTOR PUBLIC SECTOR DECISIONS PUBLIC SECTOR OPERATIONS PUBLIC SERVICE PUBLIC SERVICE DELIVERY PUBLIC SERVICE PROVISION PUBLIC SERVICES PUBLIC SPENDING PUBLIC TRANSIT RESOURCE ALLOCATION REVENUE ADEQUACY REVENUE SHARING REVENUESHARING REVENUESHARING PROGRAMS SAVINGS SCHOOL DISTRICTS SERVICE DELIVERY FRAMEWORK STATE GOVERNMENT SUBNATIONAL GOVERNMENTS SUBSIDIARITY PRINCIPLE TAX TAX BASES TAX BURDEN TAX BURDENS TAX CAPACITY TAX COMPETITION TAX EFFORT TAX RATE TAX RATES TAX SHARING TAX SYSTEM TAX SYSTEMS TAXATION TAXING POWERS TRANSFER OF RESOURCES TRANSPARENCY VERTICAL FISCAL IMBALANCE VOTERS
Online Access:	http://documents.worldbank.org/curated/en/2006/10/7131839/practitioners-guide-intergovernmental-fiscal-transfers http://hdl.handle.net/10986/9013

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Summary:	Intergovernmental fiscal transfers are a dominant feature of subnational finance in most countries. They are used to ensure that revenues roughly match the expenditure needs of various orders (levels) of subnational governments. They are also used to advance national, regional, and local area objectives, such as fairness and equity, and creating a common economic union. The structure of these transfers creates incentives for national, regional, and local governments that have a bearing on fiscal management, macroeconomic stability, distributional equity, allocative efficiency, and public services delivery. This paper reviews the conceptual, empirical, and practice literature to distill lessons of policy interest in designing the fiscal transfers to create the right incentives for prudent fiscal management and competitive and innovative service delivery. It provides practical guidance on the design of performance-oriented transfers that emphasize bottom-up, client-focused, and results-based government accountability. It cites examples of simple but innovative grant designs that can satisfy grantors' objectives while preserving local autonomy and creating an enabling environment for responsive, responsible, equitable, and accountable public governance. The paper further provides guidance on the design and practice of equalization transfers for regional fiscal equity as well as the institutional arrangements for implementation of such transfer mechanisms. It concludes with negative (practices to avoid) and positive (practices to emulate) lessons from international practices.

A Practitioner’s Guide to Intergovernmental Fiscal Transfers

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