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XXV Seminario Regional de Política Fiscal de la
CEPAL
Taller de Finanzas Públicas
Fiscal Decentralization in Peru: Achievements
and Challenges
Gonzalo Neyra Araoz
Santiago de Chile – 05 al 07 de marzo de 2013
Institutional Features
Peru is a unitary and decentralized State, divided into
regions, departments, provinces and districts
Three levels of government: national, regional and
local.
The are political and administrative autonomy of
local and regional governments
Decentralization as a permanent public policy of
State
Assignment of spending responsibilities
NATIONAL
Foreing Affairs
Defense
Justice
Police and Internal Security
Monetary and Fiscal Policy
Social Welfare Policy
International trade
Taxation
Education
Health
Environment
Industrial Policy
Roads and Telecommunications
Energy
Land Use
Local Economic Development
Urban management
Parks and Recreation
Water, Sewerage and Sanitation
Public Transportation
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REGIONAL
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LOCAL
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Revenue Sources
NATIONAL
Personal Income Tax
Business Income Tax
Value Added Tax
Excise Tax
Impuesto a las Importaciones
Excise Tax
Vehicle Tax
Property Tax
User charges, fees and contributions
Intergovernmental Fiscal Transfers
REGIONAL
LOCAL
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Intergovernmental Fiscal Transfers
Fiscal Transfers
Receiver Allocation
Coverage Use
Canon and Royalties
LyR
Rule
Partial
Invesment
Renta de Aduanas
L
Rule
Partial
Invesment
Ordinary Resources
LyR
Discretionary All
Free
FONCOMUN
L
Rule
All
Free
FONCOR
R
Rule
All
Invesment
FONIPREL
LyR
Competition Parcial
Invesment
Other transfers
LyR
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A decade of Fiscal Decentralization
Structure of Income and Expenditure
of the General Government, 2011
(Percentages)
Ingresos
Nivel de gobierno
% del PIB
Gastos
Total
General
Nacional
Regional
Local
26.4
25.1
0.2
1.2
100.0
94.7
0.8
4.4
Despúes de transferencias
Nacional
Regional
Local
16.6
4.6
5.2
62.8
17.4
19.8
Source: MEF and BCRP
% del PIB
20.1
12.8
3.7
3.7
Total
100.0
63.6
18.2
18.3
Evolution of Decentralized
Government Spending 2003 - 2012
Government expenditure as% of GDP
Source: INEI y MEF
Structure of government expenditures by
level of government
Source: MEF
Government expenditure1/ per capita,
by to department 2011
Source: INEI y MEF
1/ Not considered expenditures on Debt Service, Defense and Foreign Affairs
Importance of Fiscal Transfers in
Financing Local Governments
(% of GDP)
Source: MEF
Fiscal Transfers of Canon and Royalties to the
regional and local level
(Millions of Nuevos Soles)
Source: MEF
Fiscal Transfers per capita of Canon and Royalties
by departament, 2011
(In Nuevos Soles)
Source: MEF
Territorial Distribution of Canon and
Royalties Transfers - 2011
Source: Ministerio de Economía y Finanzas
Challenges of Fiscal Decentralization in
Peru
1. Enhancing local tax collection.
2. Encourage improvements in the quality of local
and regional spending
3. Improved performance of intergovernmental
fiscal transfers in regional equalization.
4. Improvements in the management and
registration of regional and local debt.
5. Institutional strengthening of subnational
governments in the fiscal management
Improvement of local tax administration
1. Institutional strengthening of urban local governments
(cadastre and tax administration; link with COFOPRI and
SUNARP).
2. Improving the management of cadastral valuations and
human resources.
3. Assessment eliminate exemptions.
4. Updating of the values ​for determining the property tax.
5. Vehicle tax: the tax needs to broaden the tax base.
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Improving the quality of spending in the
local and regional level
1. Delineate
2.
3.
4.
5.
a clear assignment of expenditure
responsibilities.
Costing at the regional and local decentralized service
delivery.
Formalize a multi-year framework of sub-national
public budget.
Strengthening sub-national system of performance
evaluation and accountability mechanisms.
Strengthen the Budgeting for results approach in
formulating the subnational budgets.
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Improving the performance of
Intergovernmental Fiscal Transfers
1. Compensate territories that do not receive transfers of canon
and royalties in the framework of territorial cohesion goals.
2. Establishment of stabilization funds to reduce volatility
associated with natural resource transfers.
3. Link the use of transfers to close gaps in the regions and
municipalities.
4. Improving mechanisms for evaluating the use of transfers and
strengthen accountability.
5. Avoid substitution effects on municipal tax collection
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Conclusions
1. Advances in fiscal decentralization have been mainly
on the expenditure side and funded by fiscal transfers
from the national level.
2. Tax sources are concentrated in the national
government, there is a marginal participation at the
local level.
3. Fiscal relations between the three levels of government
show high vertical imbalance.
4. The distribution of government spending and revenue
in country shows a horizontal imbalance.