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FISCAL DECENTRALIZATION
CAMBODIA AND ELSEWHERE
SUB-NATIONAL REFORM AND PUBLIC FINANCIAL MANAGEMENT
FOUR MAIN THEMES
• Sub-national administration (SNA) geography • SNA governance at a glance• SNA finances
Receipts
Disbursements• SNA concepts of decentralization
The geography of SNA
• World look
• Brazil
• State of Parana
• Paraguay
• Neighbors
Malaysia
Thailand
A QUICK WORLD LOOK
• World population about 6.6 billion• Population lives in small cities• Here are some questions o How many cities over 10 million
population? o Including how many over 1 million? o What number is Phnom Penh? o What is population of city number 1,000 o What is population of city number 2,000 o What is population of city number 3,000
ANSWERS TO QUESTIONS
No.Over 10 million 8Over 1 million 311Phnom Penh 505
PopulationCity no. 1,000 357,000City no. 2,000 176,000City no. 3,000 118,000
77% of population lives in cities of less than 120,00023% live in 3,000 cities with population greater than
120,000
BRAZIL
Population (million) 190
States 26
BRAZIL--PARANA STATE
Population (million) 10.5
Cities 400
Pop. avg. per city (000) 26.2
Per capita income (US$) 13,867
PARAGUAYPopulation (million) 6.8
Provinces 17
Cities 236
Pop. avg. per city (000) 28.9
Per capita income (US$) 1,982
CAMBODIAPopulation (million) 14.2
Provinces 24
Districts 185
Cities 1,621
Pop. avg. per city (000) 8.7
Per capita income (US$) 540
OBSERVATIONS
Brazil and Paraguay have states and cities or TWO levels of sub-national administrations
Cambodia has provinces, districts and communes or THREE levels of sub-national administrations.
The average size of Cambodian communes at 8.7
thousand is considerable less than average size in most of the world
SNA GOVERNANCE AT A GLANCE
North and South America
State/province- Governors elected,
Board of Governors elected
Cities- Governing board elected which elects
a president of the board
TALK POINTS
• Budgets
• Political parties
• Legislation
• Execution
• Accounting records
• Bank accounts
• Cash disbursements
SNA FINANCIAL MANAGEMENTEach SNA is a legal entity
It has a budget
oRevenues
oExpenditures
oBalanced
To understand decentralization
oUnderstand cash flow
oUnderstand types of revenues
oUnderstand types of expenditures
oUnderstand current operations
oUnderstand capital operations
SAMPLE SNAAnnual Annual
1998 1999 Revenues
Ordinary 2,024,636 2,332,046Capital 792,239 317,456
2,816,875 2,649,502Disbursements
Ordinary 3,356,045 3,507,920Capital 169,202 294,424
3,525,247 3,802,344
Net surplus (deficit) (708,372) (1,152,842)
ORDINARY INCOME Annual Annual Tax revenues- 1998 1999
Corporate income tax 32,577 57,839Indvidual income tax 411,587 405,890Land tax 203,226 223,655Tax on natural resources 13,580 5,532Pollution tax 84,119 200,861Real estate tax 316,092 165,319Real estate transfer tax 12,714 24,629Local taxes 117,809 106,109
1,191,704 1,189,834Other income-
Non-tax revenues 113,650 118,461Rentals 311,282 287,751Federal transfers 408,000 736,000
832,932 1,142,212Total income 2,024,636 2,332,046
Annual Annual ORDINARY EXPENSES 1998 1999 Communal services 126,703 97,108Social and cultural services 2,358,286 2,601,044Public order and safety 16,277 10,550Municipal administration 189,744 289,625Special source expenditures 423,672 432,574Other expenditures 241,363 77,019Interest expense 0 0
________ ________3,356,045 3,507,920
NET INCOME (DEFICIT) (1,331,409) (1,175,874)
Annual Annual 1998 1999
Non-current receipts:Sales of government property 460,839 235,835Accounting with central budget 66,400 30,000New bank loans 250,000Federal transfers-capital items 15,000 51,621
_________ ________Total non-current receipts 792,239 317,456
Non-current disbursements:Repayment of bank loans 0 207,940Capital additions 12,800 38,934Extraordinary expenditures 156,402 47,550
________ ________Total non current disbursements 169,202 294,424
Excess of non-current receipts over non-current disbursements 623,037 23,032
Net current and non-current results (708,372) (1,152,842)
NONCURRENT RECEIPTS AND DISBURSEMENTS
INCOME DETAILS 1 Annual Annual 1998 1999
10 Local taxesCoroporate registration tax 117,077 103,210Gambling tax 0 0Resort tax 0 0Hotel tax 732 800Advertising fees 0 2,099Parking fees 0 0Trademark fees 0 0Other 0 0
________ ________117,809 106,109
INCOME DETAILS 2 Annual Annual 1998 1999
11 Non-tax revenuesLand leases 0 0Lease on public buildings 0 260Land Privatization 58,545 33,707Municipal fees 0 12,934State Duty 17,735 17,666Municipal fnes 30,805 40,817Income from Registration 0 151Social security contribution income 0 10,948Other non-tax revenues 6,565 1,216Recovery of Loan 0 560Licenses 0 202Other 0 0
________ ________113,650 118,461
Annual Annual INCOME DETAILS 3 1998 1999
12 RentalsFees for education 0 0income from Archive 288,520 287,751Museum 3,269 0Theatre 3,172 0Share of privatization 7,645 0Other 8,676 0
________ ________311,282 287,751
13 Federal transfers Culture 76,600 96,500Sports 51,500 92,400Administration 38,000 80,100Education 191,900 331,000Special Transfers 0 0Famili Aid 50,000 81,000Other 0 55,000
________ ________408,000 736,000
ORDINARY EXPENSES DETAIL 1 Annual Annual 1998 1999
21 Communal servicesCommunal services 116,889 90,639Water and sewerage 0 0Enviornmental activities 0 0Veterinery service 9,814 6,469Agricultural services 0 0Transport and communication 0 0
________ ________126,703 97,108
22 Social and cultural servicesEducation 1,729,060 1,970,551Culture 194,224 215,557Sport 76,148 91,950Health 295,577 231,770Social security 56,774 86,522Archive 6,503 4,694
2,358,286 2,601,044
ORDINARY EXPENSE DETAIL 2 Annual Annual 1998 1999
23 Public order and safetyPublic defense 8,498 3,200Municipal police and fire 4,838 5,039Marriage bureau 2,941 2,311
16,277 10,550
24 Municipal administrationSupreme councils of automous republics 0 0Elected representative bodies 189,744 69,028Other 0 220,597
________ ________
189,744 289,625
ORDINARY EXPENSE DETAIL 3 Annual Annual 1998 1999
25 Special source expendituresFees for education 407,370 432,574income from Archive 3,269 0Museum 3,172 0Theatre 7,645 0Share of privatization 2,216 0
________ ________423,672 432,574
26 Other expendituresUrbanization fees and property register 3,000 0Bank interest and credit costs 187,139 34,352Department of youth 10,158 6,805Reserve fund (19,290) 0Other 60,356 4,365Other other 0 31,497
241,363 77,019
QUICK REVIEW
• 11 large cities, thousands of smaller
• Average population less than 30,000
• All SNAs operate with a budget
• Understand money in money out– Ordinary– Capital
• Decentralization concepts next section
COFFEE BREAK
Centralization Example
• The Cambodian provincial government– The budget
• Line department at province• Negotiated with MEF
– Source of funds• Transfers from National Treasury• Treasury account for each line department• Deposits of local revenues
• Centralized with some delegation
Decentralization Example
• Local revenue decision
• Local disbursement decision
ORDINARY INCOME Annual Annual Tax revenues- 1998 1999
Corporate income tax 32,577 57,839Indvidual income tax 411,587 405,890Land tax 203,226 223,655Tax on natural resources 13,580 5,532Pollution tax 84,119 200,861Real estate tax 316,092 165,319Real estate transfer tax 12,714 24,629Local taxes 117,809 106,109
1,191,704 1,189,834Other income-
Non-tax revenues 113,650 118,461Rentals 311,282 287,751Federal transfers 408,000 736,000
832,932 1,142,212Total income 2,024,636 2,332,046
INCOME DETAILS 1 Annual Annual 1998 1999
10 Local taxesCoroporate registration tax 117,077 103,210Gambling tax 0 0Resort tax 0 0Hotel tax 732 800Advertising fees 0 2,099Parking fees 0 0Trademark fees 0 0Other 0 0
________ ________117,809 106,109
INCOME DETAILS 2 Annual Annual 1998 1999
11 Non-tax revenuesLand leases 0 0Lease on public buildings 0 260Land Privatization 58,545 33,707Municipal fees 0 12,934State Duty 17,735 17,666Municipal fnes 30,805 40,817Income from Registration 0 151Social security contribution income 0 10,948Other non-tax revenues 6,565 1,216Recovery of Loan 0 560Licenses 0 202Other 0 0
________ ________113,650 118,461
Annual Annual INCOME DETAILS 3 1998 1999
12 RentalsFees for education 0 0income from Archive 288,520 287,751Museum 3,269 0Theatre 3,172 0Share of privatization 7,645 0Other 8,676 0
________ ________311,282 287,751
13 Federal transfers Culture 76,600 96,500Sports 51,500 92,400Administration 38,000 80,100Education 191,900 331,000Special Transfers 0 0Famili Aid 50,000 81,000Other 0 55,000
________ ________408,000 736,000
Annual Annual ORDINARY EXPENSES 1998 1999 Communal services 126,703 97,108Social and cultural services 2,358,286 2,601,044Public order and safety 16,277 10,550Municipal administration 189,744 289,625Special source expenditures 423,672 432,574Other expenditures 241,363 77,019Interest expense 0 0
________ ________3,356,045 3,507,920
NET INCOME (DEFICIT) (1,331,409) (1,175,874)
ORDINARY EXPENSES DETAIL 1 Annual Annual 1998 1999
21 Communal servicesCommunal services 116,889 90,639Water and sewerage 0 0Enviornmental activities 0 0Veterinery service 9,814 6,469Agricultural services 0 0Transport and communication 0 0
________ ________126,703 97,108
22 Social and cultural servicesEducation 1,729,060 1,970,551Culture 194,224 215,557Sport 76,148 91,950Health 295,577 231,770Social security 56,774 86,522Archive 6,503 4,694
2,358,286 2,601,044
The Decentralized Profile
• Local source revenue 30%• Government transfers 70%
100%• Unconditional income
– Local source revenues 30%– Government transfers 35%
65% • Conditional from gov’t 35%
100%