Intergovernmental Fiscal Cooperation and Subnational Revenue Autonomy Prepared for the Inter-American Development Bank by Teresa Ter-Minassian published by IDB (3/2020).
This paper focuses on two distinct but interrelated subjects, intergovernmental fiscal cooperation (IFC) and mobilization of subnational own revenues , arguing that there is a strong case for IFC, especially considering the trend in many countries toward decentralizing responsibilities for the delivery of public goods and services. Well – functioning IFC arrangements can help the different levels of government recognize and attenuate adverse externalities from their policies, avoid or reduce predatory tax competition, and better exploit economies of scale, among other po tential benefits. There is no easy recipe to ensure well – functioning IFC, since its effectiveness is influenced by several factors. Models for IFC should therefor e be tailored to individual countries’ circumstances. Nevertheless, countries can benefit from international experiences with the design and implementation of vertical and horizontal IFC forums. The paper presents a range of such experiences. It also reviews the benefits of subnational revenue autonomy, as well as the various obstacles to it , and d iscusses the pros and cons of alternative revenue handles for subnational governments in different contexts. It explores how IFC can help subnational governments strengthen their revenue policy and administration capacity, providing several successful exam ples in this área.
