Fiscal Capacity Research Articles

Freedom Through Taxation: The Effect of Fiscal Capacity on the Rule of Law

Freedom Through Taxation: The Effect of Fiscal Capacity on the Rule of Law

One Scheme Fits All: A Central Fiscal Capacity for the EMU Targeting Eurozone, National and Regional Shocks

One Scheme Fits All: A Central Fiscal Capacity for the EMU Targeting Eurozone, National and Regional Shocks

One Scheme Fits All: A Central Fiscal Capacity for the Emu Targeting Eurozone, National and Regional Shocks

One Scheme Fits All: A Central Fiscal Capacity for the Emu Targeting Eurozone, National and Regional Shocks

Інституційні засади державної податкової політики

The purpose of the article is to disclose and deepen the institutional foundations of the government tax policy, taking into account the challenges of the special period. The article defines the basic principles and criteria for the formation of government tax policy. The expediency of taking into account retrospective foreign experience in the development and implementation of domestic tax policy is substantiated. The main tax trends in foreign countries are identified – the development of tax administration in the context of digitalization of the economy; development of a system of tax monitoring and control over the income of non-residents and transnational corporations; implementation of measures to counter the erosion of the tax base; expanding the rules for disclosing information about taxpayers; institutional improvement of tax mechanisms; strengthening the effectiveness of measures to combat tax offenses. The possibilities of using tax incentives for research and innovation activities of enterprises are considered. Compliance with the principle of taxation stability is a compromise option for the implementation of tax policy under martial law. It is substantiated that the priority of domestic tax policy in the post-war period should be to stimulate employment, especially for young people. Creating new jobs and supporting employment is fully in line with the goals of sustainable development – overcoming the poverty and alleviating inequality. It is important to deshadow the incomes of the population, to form the basic conditions for the lack of motivation to evade personal income tax and a single social contribution. The possibilities of increasing the financial capacity of territorial communities, increasing the fiscal efficiency of local taxes and fees are considered. In particular, several steps are proposed to strengthen the fiscal capacity of property taxes. The expediency of developing a tax risk management system is determined, which will provide an opportunity to optimize the transaction costs of tax policy and ensure the appropriate fiscal effectiveness of the tax system.

THE PERSISTENT EFFECTS OF COVID-19 ON THE ECONOMY AND FISCAL CAPACITY OF INDONESIA

Does the pandemic of COVID-19 have persistent or transitory effects on Indonesia’s economy and fiscal capacity? This article addresses empirical answer to this question by conducting unit root tests on time series data of Gross Domestic Product (GDP), income tax revenue, Value-Added Tax (VAT) revenue, the ratio of income tax revenue to GDP, and the ratio of VAT revenue to GDP covering the period from 1984 to 2019. The results find the presence of unit root process in these time series which imply that the shock from the pandemic may persistently lower the path of economic output and fiscal capacity of Indonesia.

Cost Effective Institution Practices in Indonesia: Case Study of Badung Regency Government

This study tries to explore the practices of cost effective institutions (CEI) in the Badung district government through two approaches, namely the cost-reduction approach and the cost-control approach. This research is a descriptive research with qualitative method. The selection of research loci in Badung Regency was carried out through the Regional Fiscal Capacity Map (KFD) and the Regional Fiscal Independence Index (IKF) Map which showed very developed and good conditions so that they could serve as examples for other local governments in Indonesia. The data collection was carried out by in-depth interviews in two groups, namely the government group and the public group. The results of this study conclude that in principle the Badung Regency Government has implemented a Cost Reduction and Cost Control mechanism with a fairly good implementation strategy and method. However, not all components can be fulfilled according to the ideal concept of Cost Effective Institutions that has been mentioned in Hickel (1993). In general, at least three main stages of CEI implementation practices were found, starting from the planning stage, implementation stage, and monitoring and evaluation stage. There is not much difference between theory and practice, only the model created from the findings of this study reflects the detailed characteristics of budget management in the Badung Regency Government. This study recommends the application of CEI as an approach that is able to encourage the creation of local government functions with a spending control mechanism in order to achieve optimal performance.

Conditional impacts of political and fiscal factors on state environmental budgets

AbstractMaintaining fiscal responsiveness to deteriorating environmental conditions is a critical concern for civil society and public managers. Drawing from multiple theoretical perspectives and panel data of state environmental agency appropriations, we add to the budgeting literature on this salient topic with an examination of the legal, political, institutional, and fiscal factors that drive, and condition, environmental budgets. Given the influence of environmental pollution on funding—as stressed by previous literature—we offer evidence that such impacts are moderated by business interests, political party control in government, and fiscal capacity. Findings from this investigation provide insights into fiscal responsiveness and environmental governance at the state level, which can help elucidate and guide other federal and state co‐funded programs.

Trends in rural fiscal decentralisation in India’s Karnataka state: a focus on public health

For decades, decentralisation reforms have been seen as a powerful instrument by health policy advocates to improve health sector performance in developing countries. In India, the 73rd Constitutional Amendment introduced in 1992 called for strengthening the fiscal autonomy and service delivery capacity of rural local governments. This paper explores how decentralised governance influences public health sector resource allocation, equity and efficiency in rural Karnataka. For this, the authors analysed administrative data published by the Karnataka state government to create tailored standardised performance measures that capture the degree of local governments’ fiscal discretion in implementing public health programmes from 2011–18 at the district level. The findings highlight sector-specific differences in fiscal autonomy, ranging from high local discretion over funds in the nutrition sector to very limited discretion in the medical and public health sector. They also show that decentralised public health funding is not well-targeted to areas of greatest need in Karnataka

Locating New Urbanism Developments in the U.S.: Which Cities Have New Urbanism and Why?

This article aims to examine the characteristics of cities where New Urbanism (NU) developments are located as of 2019. We first develop a set of hypotheses to explore why some cities are welcoming NU developments more than other cities and how the cities differ in terms of general real estate development determinants, fiscal capacity and regulatory authority, advocacy group support, and cultural diversity. We then employ a Negative Binomial Regression to test the relationship between concentrations of NU developments and a variety of city characteristics by using a data set of 6923 urban cities. The results suggest that NU developments are advocated by cities with a higher level of environmental awareness, better fiscal and regulatory status, and better cultural diversity. The research results highlight the importance of continuously gaining support from environmental groups and the general public for effective expansion of New Urbanist developments within the U.S. These findings also indicate that for noteworthy changes in growth patterns to arise at a large scale across the U.S., there must be changes in values and preferences, and institutional capacity in updating land-use regulations that allow for sustainable growth.

The causal effects of rule of law & property rights on fiscal capacity

How have governments in rich countries developed the ability to levy taxes on their citizens and achieve high compliance? While it may seem simple, the process of developing fiscal capacity is often long and torturous. We explore the possibility that governments build this capacity in part by making a credible commitment to strong property rights under the rule of law. We identify large, sustained jumps in how countries score on both broad and narrow measures of legal system and property rights quality and investigate if these jumps produce increases in several measures of fiscal capacity. In a sample of 119 countries from 1970 to 2015, we find sustained improvements in property rights do not cause increases in any of our fiscal capacity measures. If the development of strong property rights is indeed necessary for developing fiscal capacity, it is evidently not sufficient.

Perilaku Pemerintah Indonesia Dalam Memaksimalkan Welfare (Pendekatan Rawlasian-Utilitarian)

The concept of utilitarian welfare in Indonesia is identically applied to the implementation of the government's fiscal capacity policy. The research design is a quantitative concept, namely an experimental design using the weights of measuring income per capital, taxes, subsidies as a function of Iriani-Tamoka welfare with the central government constraint is to maximize the social welfare of the community. The results of the study found that government behavior in setting the tax burden is identical to utilitarian behavior in maximizing the welfare of its people. The government's transfer policy through social assistance and social security which is distributed to the community as an effort by the government to maximize utility through public welfare under the constraints of subsidy allocation and the multiplier effect caused by the determination of government taxes is identical to Rawlsian's behavior.

Official Tenure, Fiscal Capacity, and PPP Withdrawal of Local Governments: Evidence from China’s PPP Project Platform

PPP withdrawal policy is helpful to reduce over-investment in PPPs leading to sustainable development. However, little is known about the role of local governments on over-investment in PPPs. Using the PPP Project Platform Data, a unique dataset, this article is able to quantify over-investment in PPPs by coding PPP withdrawal for the first time. This research tests the influencing factors of PPP withdrawal at the municipal level, according to the centralized withdrawal policy in late 2017 as an exogenous treatment. Based on the theory of over-investment to rapid economic growth, this study develops a two-pillar framework under the combination of political man and economic man assumptions to explain the PPP withdrawal of local governments. The results show that both official tenure and fiscal capacity are significant factors. In addition, debt partially mediates the mayor tenure on PPP withdrawal, and the land revenue growth can hinder the negative relationship between mayor tenure and PPP withdrawal. It implies that over-investment in PPPs is strongly influenced by official leaders’ personal promotion incentive and official group members’ collective benefit. Thus, our findings indicate that the centralized withdrawal policy is an effective instrument to prevent over-investment in PPPs. Moreover, a match should be formed between local development planning and investment plans to promote sustainable of PPP investment.

Manajemen Pengeluaran Daerah di Indonesia: Penanganan Krisis Kesehatan dan Ekonomi Selama Pandemi COVID-19

This study aimed to analyze local expenditure management strategies in Indonesia to recover the health and economy during the COVID-19 pandemic. This study used a qualitative approach with qualitative data collection methods through literature studies including books, journal articles, news, reports, and regulation. The results showed that local governments in Indonesia have refocused and reallocated Local Revenue and Expenditure Budgets as a local expenditure management strategy to handle the health and economic crisis. However, the implementation of the refocusing and reallocation policy faced problems such as limited fiscal space and was not being supported by an effective control, monitoring, and evaluation system. More findings explain that all local governments in Indonesia do have not a large fiscal capacity, so there are no options to make expansionary fiscal policies. In the implementing policy process, the Audit Board of the Republic of Indonesia has warned that there are risks of mismanagement, corruption, and state budget fraud during the COVID-19 pandemic. In addition, Indonesia Corruption Watch found that there are still weaknesses in the management of regional expenditures, especially in the process of procuring goods/services that are vulnerable to corruption. Therefore, the researcher suggested that local governments should have been optimizing Transfer to Local and Village Funds, as well as strengthening the role of external and internal supervisory agencies to carry out a system of controlling, monitoring, and evaluating local finance.

Determining fiscal equalization transfers for elementary education to Indian States

This study attempts to determine the fiscal equalization transfers for elementary education using data for 27 Indian States from 2011–12 to 2017–18 and panel data methodology, based on a model adapted from Australia’s expenditure equalization mechanism. It is found that States with larger fiscal capacity tend to spend more on elementary education and the existing transfers mechanism has failed to compensate the lagging States. Using the estimated values from the expenditure model and two benchmarks: all States’ average and top three States’ average, per student expenditure on elementary education, the State specific finance gap and total transfers need are computed. The results reveal that Bihar, West Bengal, Uttar Pradesh, Jharkhand, Madhya Pradesh and Maharashtra have a relatively large expenditure gap. Given the magnitude of the Centre's budget, the estimated additional transfers seem to be feasible. The findings of the study will be useful for policymakers and other stakeholders to create appropriate fiscal transfers strategies that can enable all Indian States to provide a standard level of elementary education.

From Microeconomic Favoritism to Macroeconomic Populism

Why would people support policies that are macroeconomically unsound, in that they are more likely to lead to such events as sovereign crises, balance of payments crises, and the like? This may arise if decisive voters are likely to bear a lower fraction of the costs of the crisis, while benefitting from the short-run gains associated with those policies, such as greater public expenditure or lower taxes. I first discuss an illustrative model based on Saint-Paul et al. (2017), based on the assumption that in a crisis, not everybody can access his or her entitlement to publicly provided goods, a feature labelled “favoritism”. If the decisive voter is relatively favored in this rationing process, then people are more likely to finance public expenditure by debt, the greater the degree of favoritism. Furthermore, favoritism and the likelihood of a crisis raises the level of public spending. Next, I consider the choice between electing a “populist” who reneges on anonymity when allocating the public good, even in normal times, and a “technocrat” who sticks to anonymity, and does all it takes to balance the budget. I show that the support for the populist is greater, (i) the greater the likelihood of default, (ii) the more depressed the macroeconomic environment, (iii) the greater the inherited level of public debt and (iv) the lower the state’s fiscal capacity. I then argue that the model helps understanding some episodes in French pension reform. Some occupational groups supported unsustainable reductions in the retirement age because they expected that other workers would bear a higher proportion of the burden of future adjustment. Finally, using a panel of countries, I provide evidence in favor of some of the predictions of the model. As predicted, favoritism raises public debt, budget deficits, and public spending. It also raises the likelihood of a fiscal crisis through its effect on public debt. Furthermore, “populists” are more likely to conquer power, the higher the degree of debt and budget deficits, and the higher the level of government spending – the latter finding being consistent with the model’s prediction on the effect of fiscal capacity.

The Real Estate Academic Leadership (REAL) Rankings for 2017–2021

This is the seventh release of the Real Estate Academic Leadership (REAL) rankings for authors and institutions. These rankings continue to include articles published solely in the top three real estate journals (The Journal of Real Estate Finance and Economics, The Journal of Real Estate Research, and Real Estate Economics) based on multiple rankings. Despite the pandemic and impacts to university budgets, many universities still managed to hire faculty, albeit many on term-limited visiting professor positions. The changes in this year’s rankings largely reflect the fiscal capacity of the most competitive institutions to weather the pandemic and remain productive in the real estate intellectual arena.

China and strategic competition in a divided Pacific Islands region

While China has increased its engagement with and investment in the Pacific Island region since the mid-2000s, few states there have the fiscal capacity to take advantage of the large infrastructure loans that Beijing has offered as part of its global Belt and Road Initiative. However, several large Chinese companies in the construction and telecommunications sectors are now well established in the Pacific Islands and are looking for more business. China’s activities have prompted other countries – including Australia, France and the United States – to increase their own participation in regional affairs, which was one of the factors that caused a significant dispute at the Pacific Islands Forum in February 2021

The European Union post COVID-19: Preserving innovation's cutting edge and fostering social cohesion

Abstract Despite a long period of post-crisis recovery, the COVID crisis caught the EU in a precarious state. The policy and institutional innovations during the financial crisis tempered the macroeconomic imbalances that had caused the crisis. Nevertheless, the EU was left with a strong trend of divergence in economic and social performance because of the lack of sufficiently strong reforms at EU and national levels. But the lessons of the previous crisis were learned. This time around, the EU-level policy and institutional innovations were decisive. The fiscal capacities of the hard-hit countries were strengthened quickly. Green and digital transformation will require a major new wave of innovation in the corporate sector in the EU. This, in turn, critically hinges on improving the quality of public and private institutions and advancing with the implementation of major reforms at the EU level, such as the digital single market or Capital Market Union. Implementing these reforms fully, and preventing later reversals is a key to stemming the trend of economic and social divergence, thus strengthening the coherence of the EU.

Public policy measures for COVID-19 crisis management: lessons from the UAE

PurposeThe COVID-19 pandemic has exposed the fragility of government institutions and prompted a broad range of policy measures from governments around the world. Policy responses to the pandemic have varied considerably, both in nature and in success. This paper highlights the policy capacities of the UAE in different areas that have contributed to managing the COVID-19 crisis. Specifically, the paper examines the functional capacity, analytical capacity, fiscal capacity, well-timed information-sharing capacity and political capacity of the UAE in addressing the pandemic.Design/methodology/approachThe study on which this paper was based adopted a mixed-method approach to analyze policy capacities. The trajectory and timeframe of COVID-19 from February 2020 to February 2021 were observed intensively and included in the policy capacity analysis. The secondary dataset was collected from several sources and assessed using rapid content analysis to highlight the formal and institutional policy measures implemented during the crisis. To complement the policy analysis and understand the key role of policymakers, semi-structured interviews were conducted with local officials working in various line departments that formulate and implement policy strategies for the UAE government.FindingsThe findings of the study showed that although COVID-19 has severely impacted the UAE, the nation has effectively controlled the spread of the virus and reduced its mortality rate. The UAE government has taken swift policy actions concerning coercive control and mitigation based on a centralized decision-making style, the strengthening of administrative capacity by collaboration, coordination with different departments, successful communication with residents, the allocation of adequate financial resources and a high level of trust in the government by citizens.Originality/valueThis work contributes to the existing literature by highlighting the policy capacity approach to managing the crisis. The UAE case can be used by policymakers as comparative studies of policy designs, tools and capabilities that can be implemented to manage future pandemics and other crises.

Does war exposure increase support for state penetration? Evidence from a natural experiment

ABSTRACT Does war exposure increase popular support for state penetration or are changes in taxation and economic intervention primarily elite-driven? Existing research rests mainly at the macro level and is therefore unable to distinguish between the two mechanisms. In this paper, we employ a natural experiment to investigate whether direct war exposure affects popular preferences for state penetration in the post-war period. We use accidental bombardments of Swiss municipalities during the Second World War as treatments to examine whether popular preferences expressed in direct democratic votes on tax policies and economic intervention in war-affected municipalities followed different trajectories in the post-war period compared to municipalities that were not the target of accidental bombardments. We show that war exposure increased popular support for state intervention into the economy, but we do not find an effect of accidental bombardments on popular support for more progressive taxes or the extension of fiscal capacity.