MOZAMBIQUE- LOCAL TAXATION UNDER FISCAL STRESS- WHAT OPTIONS, WHAT IMPLICATIONS? BERNHARD WEIMER 5TH INTERNATIONAL WORKSHOP ON DOMESTIC REVENUE MOBILISATION FOR IMPLEMENTING THE 2030 AGENDA: THE ROLE OF SUBNATIONAL TAXATION GDI / DIE, BONN, 13-14 SEPTEMBER, 2016
14
Embed
Mozambique- Local taxation under fiscal stress- … · mozambique- local taxation under fiscal stress- what options, what implications? bernhard weimer 5th international workshop
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
MOZAMBIQUE- LOCAL TAXATION UNDER FISCAL
STRESS- WHAT OPTIONS, WHAT IMPLICATIONS?
BERNHARD WEIMER
5TH INTERNATIONAL WORKSHOP ON DOMESTIC REVENUE MOBILISATION FOR
IMPLEMENTING THE 2030 AGENDA:
THE ROLE OF SUBNATIONAL TAXATION
GDI / DIE, BONN, 13-14 SEPTEMBER, 2016
POLITICAL ECONOMYStructure
• Extractive, export oriented economy
• High poverty rates
• predominant foundational party since Independence (1975)
• Neopatrimonial-clientilist system with rent seeking national and local elites
• monopolistic, inefficient SOEs
• Limited Access Order (LAO), - > periodic conflicts, conflictual political settlement
Current Crisis
• Low intensity war, partial agreement (2014) failing, ongoing peace negotiations, incl on autonomous provinces
• Unfavourable global economic environment and markets
• Unsustainable public debt caused by surge of illicit Non concessional credits ( 2,3 bln USD) Risk of defaulting
• Budget support (500 million USD ; 2016) and IMF standby credit (286 million USD) frozen
• Budget deficit increase (approx. 500 Million USD, 2016))
• Decline of FOREX reserves , Decline of FDI
• Dramatic devaluation of currency (50% of value since 2014) , rising inflation
• Decline of growth rate , from 8% (2013) to 4% (2016)
• Closure of businesses, increasing unemployment
FISCAL DECENTRALIZATION Structure of Territorial Admin
• Little transparency (share for private profit, procurement)
3. Intensified collaboration Municipalities - National Tax Authority
• Sharing of registers
• Joint HR training and fiscal education programmes
• Transfer ISPC to Municipalities
4. Review of allocation criteria in transfer system (WB)
• Include potential, tax effort / performance as allocation criteria
• Incentives / disincentives
• Option 1: to link allocating grants with the rate of growth of OSR
• Option 2: matching principle’, where revenues collected by a municipality are matched by the
central government through a co-financing grant
5. Review sharing of natural- resource based revenue
• 2013: 2.75 % of the royalties generated by mining and natural gas sectors to seven ‘localities ‘
• 20% of profit of large scale agricultural and forestry projects to ‘communities’
• Allocation criteria and procedures lack transparency
6. Combination of 1-5
• requires reform of intergovernmental transfer system
REVENUE MOBILIZATION STRATEGIES- OPTIONS, CONT
MAIN OBSTACLES TO REVENUE MOBILIZATION
1. Capacity Building (Option 1): has been mainstreamed in municipal support projects, with little overall success (with variations). Causes:
• Clientilist rent seeking and tax evasion practises by local elites and SOE
• Decentralized Corruption (sub-valorization of properties)
• Lack of incentives for performance (HR, leadership )
• Property tax: too complex, not commensurate with economic capacity
• Absence of internal control , external audits of municipal accounts
• Lack of citizens engagement and social control
2. Macroeconomic and fiscal crisis at national level produces
• Shrinking local economic and taxation base , transfers
• Declining purchasing power and availability of income
• Risk of double taxation (ISPC->national Tax Authority; local Business fee-> municipal tax department)
• Resistance to (local and national) taxation – > tax evasion
• Informalization of economy
3. Political crises implies
• Declining confidence in Government and ruling party
• Uncertainties, human and economic cost of war
• Potentially: Review of intergovernmental transfer system impacting on municipal revenue base and transfers
CONCLUDING QUESTIONS
Under what conditions can local revenue mobilization work in a LAO State, which
• Dos not deliver basic public goods and services with sufficient quality and coverage;
• Produces economic and fiscal crises not conducive to inclusive human , social and economic development , trust in government;
• Shows biased taxation favouring elite and big business to the detriment of ordinary citizens;
• Shows high rates of ‘Taxation by Corruption’ ( including by the national and local tax authorities), exacting a high cost and regressive effect on the poorer strata
• Lacks an institutionalized public (Habermas), in which rules of the game are discussed, established and controlled , incl in matters of fiscal policy and taxation?