2002年-世界发展银行全球_Brazil___Issues_in_Fiscal_Federalism_66页_4mb

Summary of Brazil Issues in Fiscal Federalism

Core Content

This report, prepared by the World Bank, analyzes the fiscal federalism structure in Brazil, focusing on both immediate and long-term challenges. It outlines the current system of intergovernmental relations, the role of subnational governments, and the implications of fiscal policies on macroeconomic stability, poverty reduction, and public service efficiency.

Main Points

1. Role of Subnational Governments

• Subnational governments (states and municipalities) control nearly half of the public sector expenditure.
• They are dominant providers of education, health care, infrastructure, and public security.
• In recent years, subnational deficits have threatened macroeconomic stability.
• They are now central to "second generation" reforms in public service delivery and management.

2. Fiscal Federalism Structure

• The federal system is not in crisis, with a long history of multiparty federalism.
• The 1988 Constitution defines the functional responsibilities of federal, state, and municipal governments.
• Federal responsibilities include national defense, currency emission, public debt control, and trade regulation.
• States have broad powers, including the ability to legislate and manage public employment.
• Municipalities are also granted significant autonomy, including the power to legislate on local issues and provide local services.

3. Immediate Issues

Subnational Debt

• State governments have historically run deficits and sought federal bailouts.
• Three major debt crises occurred in the 1990s, with the last one threatening macroeconomic stability.
• The Law of Fiscal Responsibility (LRF) was introduced to limit subnational borrowing and reform budgetary practices.
• The new system makes excessive borrowing risky and fiscally disadvantageous.
• It faces challenges in implementation, including administrative burdens on courts and legislatures, and potential erosion of federal political commitment.

Pension Liabilities

• Generous pension benefits for civil servants, including 100% of exit salaries, are constitutionally guaranteed.
• As the labor force ages and life expectancies increase, pension obligations are rising.
• The LRF's deficit controls are in conflict with these obligations.
• Recent constitutional changes have tightened retirement criteria, and some states have increased employee contributions and used privatization funds to capitalize pension systems.
• However, reducing benefits remains necessary to address the pension crisis.

4. Longer Term Reforms

Clarifying Functional Responsibilities

• The division of functions between states and municipalities is unclear, leading to accountability issues.
• Municipalities are not clearly defined in terms of responsibilities, unlike in other federal systems (e.g., U.S. and U.K.).
• There is a need to establish explicit distinctions between different types of municipalities based on their size, population, and economic conditions.
• Municipalities could contract out services or form joint districts to improve efficiency.

Intergovernmental Transfers

• Brazil has an extensive system of revenue sharing to support poorer states and municipalities.
• The Fundo de Participação dos Estados (FPE) and Fundo de Participação dos Municipios (FPM) are key transfer mechanisms.
• However, the system lacks effective targeting and is prone to leakage to higher-income groups.
• There is a call to reduce revenue sharing and shift toward more specific grants for services with distributional impacts, while increasing reliance on local taxes.

Tax Structure

• Roughly one-quarter of all taxes are collected by subnational governments.
• Half of the federal taxes must be shared with subnational entities.
• The federal government faces a "Hobbesian choice": increasing less distortionary taxes would require sharing with subnational governments, while increasing distortionary taxes would harm economic efficiency.
• Tax reforms are under consideration to reduce distortions in the system.

5. Priorities

Short Term

• Strict enforcement of the LRF to control subnational deficits and signal the end of federal bailouts.
• Reduction of pension benefits for active subnational civil servants to align with fiscal controls.

Long Term

• Reforms to clarify the roles and responsibilities of subnational governments.
• Improved targeting and earmarking of intergovernmental transfers.
• A shift from broad revenue sharing to more specific grants and increased reliance on local taxes.

Key Information

• Currency: Real (R$)
• Exchange Rates (as of January):
  • 1997: R$1.12 per USD
  • 1999: R$1.21 per USD
  • 2000: R$1.80 per USD
  • 2001: R$1.96 per USD
  • 2002: R$2.37 per USD
• Fiscal Year: January 1 – December 31
• Key Acronyms:
  • LRF: Law of Fiscal Responsibility
  • FPE: State Participation Fund
  • FPM: Municipal Participation Fund
  • RGPS: Social Security System for Private Sector Employees
  • RJU: Public Sector Social Security System
  • PAB: Basic Health Care Package
  • PSF: Family Health Program
  • SUS: National Health Insurance System

Conclusion

Brazil’s fiscal federalism has evolved significantly since the 1988 Constitution, but it still faces challenges in terms of accountability, efficiency, and fiscal sustainability. While short-term reforms focus on debt control and pension reform, long-term structural changes are necessary to clarify the roles of subnational governments and improve the targeting of intergovernmental transfers. The report emphasizes the need for both international examples and domestic innovations to guide these reforms.