Fiscal transfers and public policy

Abstract

In a decentralized system, intergovernmental fiscal transfers constitute an important instrument of public management, since they contribute to the achievement of redistributive or compensatory objectives, and therefore, to the reduction of problems of allocative inefficiency and / or social and territorial equity. In the Bolivian decentralization process, several tax transfer systems have been established based on different public policies, and are currently the main source of financing for subnational administrations. Although these systems have achieved an important advance in terms of territorial redistribution of fiscal resources, with potentially significant effects from a social point of view, in practice they may be generating problems of inefficiency and fiscal laziness, jeopardizing the progress in achieving of greater equity. The document describes this process and highlights, as one of the great challenges in the deepening of the decentralization process, the redesign of the transfer systems with a focus on achieving greater efficiency and equity, and mainly towards their own sustainability.