Fiscal Capacity Research Articles

Revenue Slumps and Fiscal Capacity: Evidence from Brazil

Revenue Slumps and Fiscal Capacity: Evidence from Brazil

Regression to the Mean: Fiscal Capacity and Tax Reform in Indonesia

Regression to the Mean: Fiscal Capacity and Tax Reform in Indonesia

The State Capacity Ceiling on Tax Rates: Evidence From Randomized Tax Abatements in the DRC

This paper investigates how tax rates and tax enforcement jointly impact fiscal capacity in low‐income countries. We study a policy experiment in the D.R. Congo that randomly assigned 38,028 property owners to the status quo tax rate or to a rate reduction. This variation in tax liabilities reveals that the status quo rate lies above the revenue‐maximizing tax rate (RMTR). Reducing rates by about one‐third would maximize government revenue by increasing tax compliance. We then exploit two sources of variation in enforcement—randomized enforcement letters and random assignment of tax collectors—to show that the RMTR increases with enforcement. Including an enforcement message on tax letters or replacing tax collectors in the bottom quartile of enforcement capacity with average collectors would raise the RMTR by about 40%. Tax rates and enforcement are thus complementary levers. Jointly optimizing tax rates and enforcement would lead to 10% higher revenue gains than optimizing them independently. These findings provide experimental evidence that low government enforcement capacity sets a binding ceiling on the revenue‐maximizing tax rate in some developing countries, thereby demonstrating the value of increasing tax rates in tandem with enforcement to expand fiscal capacity.

Impact of Fiscal Capacity on the Convergence of Income Inequality in Russian Regions

Impact of Fiscal Capacity on the Convergence of Income Inequality in Russian Regions

Increasing the role of transport enterprises in strengthening the financial stability of the region

The present essay delves into the function of transport companies in fortifying the fiscal capacity of cross-border agreements and guaranteeing the economic viability of Uzbekistan’s regions. The specific scientific approaches, research materials published on the subject in statistical and periodical information publications, and online resources of domestic and international scholars devoted to the study of the nature of financial potential, assessment, and issues of its formation represent the theoretical and methodical foundations of the research. It should be highlighted that the need to strengthen the scientific underpinnings of the regional economy’s sustainable development justifies both domestic and international research on the creation and enhancement of financial resources for enhancing the structure of the regional economy.

Fiscal decentralization and impact on economic growth in the Republic of Croatia

Fiscal decentralization is the transfer of responsibility between the provision of public services and sources of financing by the central government to lower levels of government, with the outcome depending on how the process itself is devised and implemented. Proper and balanced implementation of fiscal decentralization leads to economic growth, achieving economic goals that can bring economic benefits. In addition to economic benefits, decentralization could lead to greater accountability, transparency, and citizen engagement, which would also improve the level of democracy in society. Since 2002, the Republic of Croatia has secured a significant amount of financial resources through the system of tax revenue sharing and aid allocation, which has significantly improved the fiscal capacity of all local units. The impact of fiscal decentralization in the Republic of Croatia on economic growth was tested using a panel analysis. From the results obtained, there is a significant positive relationship between fiscal decentralization and economic activity, and based on the results obtained, it can be concluded that fiscal decentralization in the Republic of Croatia had a positive impact on economic growth. This also confirms the role of lower levels of government established to improve the quality of life of citizens by deciding on the provision of local public services close to where they are provided and close to the users, providing better education, social and health services and infrastructure, thus positively influencing economic growth. In further research, it is necessary to focus on the creation of a better system of financing lower levels of government and on the fiscal autonomy of local units in the Republic of Croatia, in order to make the impact of fiscal decentralization on economic growth even more evident and to have as much influence as possible on the even development of the Republic of Croatia.

Marrying Fiscal Rules & Investment: a Central Fiscal Capacity for Europe

Marrying Fiscal Rules & Investment: a Central Fiscal Capacity for Europe

Marrying Fiscal Rules & Investment: A Central Fiscal Capacity for Europe

Marrying Fiscal Rules & Investment: A Central Fiscal Capacity for Europe

The religious origins of state capacity in Europe and China

As conduits for the transmission of cultural values, networks of religion and state originating in premodern Europe and China contributed to the institutional roots of their respective development and continue to forge different economic trajectories. In Europe, a universalistic religious doctrine, ideologically and institutionally distinct from the state, led to important underlying differences in market structures and informal constraints. Legal protocols and innovations in social governance emerged whose origins lay in Church doctrine and Christian ethics. In China, Confucian teaching and an examination-based recruitment of officials strengthened centralized authority; but without a systemwide transmission of unifying prosocial bonds and values as a foundation for contract law, this cheap system of social control left the state encumbered with fiscally anemic finances. These differences preceded the Great Divergence and persisted long after it to produce in Europe greater civic and fiscal capacity, and in the end more state building.

ОЦІНКА СУЧАСНОГО СТАНУ ДЕРЖАВНИХ ФІНАНСІВ В УКРАЇНІ

The current state of public finances in Ukraine, in particular of state budget and debt burden is analyzed in the article. The relevance of the researched topic due to the need to build an effective system of the state finances that have a special value in the conditions of cyclical economic fluctuations and the decline of productive forces, decline in social living standards, decrease in competitiveness of our country and martial law. In order to perform these functions, the state finances should have an adequate and optimal resource base. The dynamics of nominal GDP for the last five years are given and also a comparative analysis of changes in GDP per capital was carried out in Ukraine and in leading European states. It was established that the nominal GDP of Ukraine in the national currency during the studied period had a tendency to increase except of key challenges and threats on the change in GDP were substantiated. The largest influence for reduction GDP in 2022 caused a full-scale invasion of the aggressor country in Ukraine, growth of external debt, a large part of a shadow economy and low investment attractiveness of Ukrainian companies. The implementation of the state budget of Ukraine analyzed in terms of income, expenses and lending. Revenues of the state budget in 2022 in creased due to the international financial help, which composed more than a quarter of all incomes of a state budget. State expenditures of budget in 2022 were on 17,1% lower than planned. It is observed the growth of a profitable part of a budget which is due to economic and political factors. The emergence of significant fluctuations and deviations in the structure of the reGDPvenue side of the state budget in the context of the budget policy of the state in modern conditions is due to the low quality of planning, which has been observed in recent years in the organization of public finances. The dynamics and structure of the state debt are given and also the dynamics of the debt burden for 2018-2022. It was grounded that the growing debt dependence of the Ukrainian government will significantly weaken the fiscal capacity of the state. In general, the stability of the public finance system, taking into account the existing challenges and threats.

Funding High-poverty School Districts: Federal Policy Tools and the Limits of Incentives

Abstract What can the federal government do to help ensure that the public schools attended by children living in poverty have enough resources to serve their students? In this brief, we describe existing federal efforts to support education spending in high-poverty districts, discuss their limitations, and suggest alternative approaches for federal policy. We focus especially on the Education Finance Incentive Grant (EFIG) formula—a part of the compensatory Title I grant program designed to encourage changes to state school finance policy—and show that the incentives embedded in the formula are in fact negligible; revising the formula to be more effective would be difficult. Further, any attempt to incentivize desirable state policy faces a fundamental trade-off: Such policy can reinforce inequality because districts in states that do not respond to the incentives by adopting desirable policies also do not receive (as much) federal funding. We argue that federal policy should be more attentive to state fiscal capacity because it is an important determinant of district-level school spending, and the federal government is uniquely positioned to address between-state inequality.

Rules or capacity for the EU’s fiscal future? From Werner and McDougall to the present

PurposeThe COVID19 crisis has thrown wide open the debate on Europe’s Economic and Monetary Union’s (EMU) future. Next Generation EU (NGEU) has broken the stalemate over a central fiscal capacity. The open question is whether NGEU is a one-off or a first step. The suspension of the Stability and Growth Pact has given new urgency to the debate on reforming EMU’s fiscal rules.Design/methodology/approachThere is no debate as yet about how these two prospects relate to each other. This paper argues that a permanent fiscal capacity and revised rules should be seen as alternatives.FindingsThis study makes two claims: first, a fiscal capacity renders a reformed pact unnecessary and second, that is an optimal solution politically. A fiscal capacity would provide an efficient asymmetric shock absorber and therefore reduce the need for pre-emptive action against negative cross-border externalities. It would also provide an abundant supply of an EU-wide safe asset around which to structure the EU’s financial system, thus rendering unnecessary the backstopping of member states' debts.Originality/valueThis would restore democratic accountability while eliminating moral hazard and enforcement problems.

Political Economy of Non-Communicable Disease (NCD) prevention and control in Lebanon: identifying challenges and opportunities for policy change and care provision reforms

IntroductionLebanon is a middle-income country facing substantial fragility features. Its health profile shows a high burden of NCD morbidity and mortality. This paper intends to analyse the political economy of NCD prevention and control in Lebanon.MethodsThis study adopted a literature-based case study research design using a problem-driven political economy analysis framework. A total of 94 peer-reviewed articles and documents from the grey literature published before June 2019 were retrieved and analysed.ResultsLebanon’s political instability and fragile governance negatively affect its capacity to adapt a Health-in-All-Policies approach to NCD prevention and enable the blocking of NCD prevention policies by opposed stakeholders. Recent economic crises limit the fiscal capacity to address health financing issues and resulting health inequities. NCD care provision is twisted by powerful stakeholders towards a hospital-centred model with a powerful private sector. Stakeholders like the MOPH, UN agencies, and NGOs have been pushing towards changing the existing care model towards a primary care model. An incremental reform has been adopted to strengthen a network of primary care centres, support them with health technologies and improve the quality of primary care services. Nevertheless, outpatient services that are covered by other public funds remain specialist-led without much institutional regulation.ConclusionOur study revealed a locked equilibrium in NCD prevention policymaking in Lebanon, but with an incremental progress in service delivery reforms towards a primary care model. Advocacy and close monitoring by policy entrepreneurs (such as civil society) could initiate and sustain the implementation of policy change and care model reforms.

Determinants of municipal investments

ABSTRACT This article studies local government investments using a panel data set of Norwegian municipalities in the period 2003–2019. We investigate variations in investments across local governments and their relation to fiscal capacity, needs based on population growth, and political factors. Our results suggest that expected population growth and fiscal capacity largely explain variations in investments. The finding that expected population growth is a strong determinant, while other factors such as political composition of the local council has little if any effect, indicates that Norwegian local governments are quite rational in deciding their investment policy. On the other hand, we do observe indications of election cycles, where investments increase in election years. We also find results suggesting that increased investments can increase the vote-share for the incumbent coalition, although we see no additional effect from increasing investments in election years. Hence, investments do not seem to be completely insulated from political considerations.

Financial Performance AnalysisBanking CompanyOn the Indonesian Stock Exchange

The success of a bank can be measured by the ability of the bank's fiscal work. By looking at the ability of a bank's fiscal work, it can be concluded whether the bank is in good condition or not. This research aims to dissect the fiscal work capabilities of banks listed on the Indonesia Stock Exchange for the 2019-2021 period based on the bank's liquidity level and solvency level. This research uses data analysis, a quantitative descriptive approach style and the data collection method used in this research is the validation method and the data studied is in the form of daily financial reports I-IV. The population used in this research is all banks registered on the IDX for the 2019-2021 period. The slice model used in this exploration is a deliberate slice system. The results of this research show that firstly, the fiscal work capacity of banks listed on the Indonesia Stock Exchange for the 2019-2021 period based on the level of liquidity as measured by the current ratio is good because it is suitable for paying current debts due to the minimum measurability of 2 times or 200. Second, The fiscal performance of banks listed on the Indonesia Stock Exchange for the 2019-2021 period based on the level of solvency as measured by the debt to equity ratio shows that the condition is not bad because the figure is above the minimum measure of 35.

UK adult ADHD services in crisis.

The UK's services for adult attention-deficit hyperactivity disorder (ADHD) are in crisis, with demand outstripping capacity and waiting times reaching unprecedented lengths. Recognition of and treatments for ADHD have expanded over the past two decades, increasing clinical demand. This issue has been exacerbated by the COVID-19 pandemic. Despite an increase in specialist services, resource allocation has not kept pace, leading to extended waiting times. Underfunding has encouraged growth in independent providers, leading to fragmentation of service provision. Treatment delays carry a human and financial cost, imposing a burden on health, social care and the criminal justice system. A rethink of service procurement and delivery is needed, with multiple solutions on the table, including increasing funding, improving system efficiency, altering the service provision model and clinical prioritisation. However, the success of these solutions hinges on fiscal capacity and workforce issues.

The fiscal effects of armed conflicts in Africa

AbstractThis study examines the impact of armed conflicts on the fiscal capacity of African governments. It made use of a data set covering 1997–2021 for 50 countries, as well as the system dynamic generalized method of moment estimation technique. The results show that, in the short run, conflicts undermine tax revenue, mount pressure on military expenditure, and force governments to rely more on mineral resource rents for their fiscal needs. As conflicts persist, this fiscal feature changes to a pattern that reflects a decline in mineral resource earnings and an increase in tax revenue. The impact on public health expenditure also changes from an increasing to a decreasing pattern, whereas the positive impact on military expenditure and external borrowing persists over time. The findings suggest that African countries in conflict can address their fiscal challenges by observing these patterns and putting in place policies that protect public resources (e.g., the adoption of digital financial technology protocols to facilitate remote revenue collection and strategic protection of mineral resource‐endowed zones from insurgents' control). Overall, enhancing government effectiveness and strengthening the institutions of governance is important to facilitate a quick return to normalcy in the event of conflict and to prevent future conflicts.

MANIPULASI AKRUAL DALAM PELAPORAN KEUANGAN PEMERINTAH DAERAH DI INDONESIA: APAKAH GOVERNMENT SIZE DAN KAPASITAS FISKAL MEMILIKI EFEK?

This study examines the effect of government size and fiscal capacity on accrual manipulation in local government financial reporting in Indonesia. The sample in this study amounted to 179 districts and cities in Indonesia. The data used is secondary data from local government financial statements (LKPD) for the fiscal year 2020 audited by the Financial Audit Agency (BPK). This study used the Jones Model equation in calculating accrual manipulation. The data analysis method in this study used multiple linear regression analysis with the SPSS version 26 software. The results showed that the variables of government size and fiscal capacity jointly or simultaneously affect the manipulation of accruals in the financial reporting of local governments in Indonesia. Government size has a positive effect and fiscal capacity negatively affects accrual manipulation.

Social trust and the support for universal basic income

This paper presents a theoretical model showing how political mistrust affects people’s preferences for Universal Basic Income (UBI) when its implementation involves a reduction in spending for other public services (welfare retrenchment). The model shows that individuals with lower levels of political mistrust are more likely to endorse UBI, reflecting their trust in the government’s ability to manage public resources and avoid wasteful retrenchment of other public services. The model also shows that generalised mistrust – characterised by agents’ expectations of their fellow citizens’ misbehaviour that can reduce the government’s fiscal capacity – does not significantly influence preferences for UBI when it involves a partial retrenchment of other public services. This result is driven by the agents’ perception that their fellow citizens’ misbehaviour would occur irrespective of the UBI implementation. The empirical analysis with 265 European regions from the European Social Survey (ESS) confirms the predictions of the model.

Towards equitable healthcare provision: convergence of public health spending and the role of decentralization in Malaysia

This paper investigates the behavior of public health spending across different states in Malaysia, focusing on the convergence of per capita spending and the impact of decentralization on health expenditure disparities. Despite slight variations in life expectancy at birth, Malaysia can highlight its efforts to lessen dispersion in infant mortality, crude death rates, and crude birth rates among its states. The findings reveal a convergence in spending among states was observed from 2005 to 2019, with conditional models displaying faster convergence. The results highlight that factors beyond initial spending significantly influence health expenditure growth across states. State revenue positively impacts healthcare expenditures’ growth rate, while the impact of per capita federal transfers remains insignificant. The state’s fiscal capacity, the initial gross domestic product, and population growth significantly impact healthcare expenditure. The study suggests that a fair distribution of healthcare spending across states contributes to spatial equity in healthcare service provision.