Public Finance in Developing Countries

31 Pages Posted: 18 Jul 2012 Last revised: 22 Oct 2012

See all articles by Arindam Das-Gupta

Arindam Das-Gupta

Goa Institute of Management

Richard M. Bird

University of Toronto - Joseph L. Rotman School of Management; Georgia State University - Andrew Young School of Public Policy

Date Written: June 30, 2012

Abstract

This review of public finance in developing countries covers tax advice and practice during the past half century, principles of good public finance, some key issues in development finance during the period, fiscal decentralization and some important open questions. Thinking about good tax systems for developing countries has changed from systems centered on progressive income taxes to, in the 1980s, systems with low rates having a broad based indirect tax as the major revenue instrument. Although there is no 'one size fits all' set of rules, a framework for evaluating public finance structures and institutions in terms both public revenue and spending as well as the fiscal balance is set out, and some key areas - income taxes, VAT, earmarking, tax evasion and administration, and such non-tax revenues as those from government monopolies, natural resources and borrowing – discussed. The review of fiscal decentralization points to possible efficiency gains and from increased local accountability and knowledge as the major benefit if fiscal powers of local government are increased and suggests that greater reliance on own revenue promotes fiscal discipline, a further benefit that may outweigh such possible costs as the loss of some macroeconomic control and possibly lopsided investment priorities. The challenges of increased globalization to national tax bases and the possibility of global taxes to finance global public goods are also discussed briefly, as is the need to improve local fiscal expertise and institutions in developing countries.

Keywords: public finance, fiscal advice, fiscal decentralization, taxation, globalization, non-tax revenue

JEL Classification: B00, H2, H3, H5, H6, O23

Suggested Citation

Das-Gupta, Arindam and Bird, Richard Miller, Public Finance in Developing Countries (June 30, 2012). Rotman School of Management Working Paper No. 2111065. Available at SSRN: https://ssrn.com/abstract=2111065 or http://dx.doi.org/10.2139/ssrn.2111065

Arindam Das-Gupta (Contact Author)

Goa Institute of Management ( email )

Ribandar, Goa 403006
India
91-832-2490300 (Phone)

HOME PAGE: http://www.gim.ac.in

Richard Miller Bird

University of Toronto - Joseph L. Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
905-274-8841 (Phone)

Georgia State University - Andrew Young School of Public Policy

International Studies Program
Atlanta, GA 30303-3083
United States

HOME PAGE: http://www.aysps.gsu.edu

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