Template-Type: ReDIF-Article 1.0
Author-Name: Lucie Sedmihardská
Title: Unlimited Possibilities for Fiscal Transparency Improvement
Abstract: Dear readers, this special issue of the European Financial and Accounting Journal is a result of a joint initiative of the Faculty of Finance and Accounting at University of Economics, Prague and the Network of Institutes and Schools of Public Administration in Central and Eastern Europe (NISPAcee). The papers included in this volume were selected from the papers prepared in the framework of the NISPAcee Working Group on Fiscal Policy and presented in May 2011 at the 19th NISPAcee Annual Conference. NISPAcee is a non-government, non-profit, international membership organization. It was established in 1994 with the aim to serve as a clearinghouse for information for the newly established schools and programs of public administration in post communist countries and to promote the development of public administration education and training in these countries. At present the membership of the organization includes 106 institutional members and 26 associate members. The Executive Secretariat of the organization is located in Bratislava, Slovakia. Main activities of the organization includes annual conferences, training programs, summer schools, high level meetings, specialized conferences and workshops, tailor-made seminars and study-tours, databases of institutions and experts, research programs, publication program, technical assistance and development programs. During this autumn dozens of researchers around the world, including myself, compile the Open Budget Survey 2012, which is a biennial comparative research of budget transparency and accountability undertaken in more than 90 countries. The search of information and filling of the questionnaire make me think about many simple steps which would improve transparency. At the same time I am aware that there are unlimited possibilities for improvement in this area. Fiscal or budget transparency gained increasing attention from international institutions, national governments and nongovernmental organizations in the last twenty years. This attention presented itself first in the specifications how transparent budgets and public finances should look like and second in the attempts to measure and compare transparency across countries. Fiscal transparency is often viewed as a tool promoting fiscal discipline which is accompanied with more credibility for financial markets and lower costs of debt. Frequently approved fiscal rules or fiscal caps can only lead to fiscal discipline if they are backed by transparent reporting. Otherwise they create various “perverse” incentives. Fiscal transparency is important to reduce incentives to be fiscally irresponsible. Improved fiscal transparency is also important for engagement of citizens and civil society organizations in the decision-making process. Government fiscal activities should be subject to public scrutiny, which is impossible without timely disclosure of all relevant documents and information. At the moment there are two major international norms of budget transparency: the IMF Code of Good Practices on Fiscal Transparency which was for the first time approved in April 1998 and the OECD Best Practices for Budget Transparency published in 2000. The IMF Code of Good Practices on Fiscal Transparency states that there should be a clear legal and administrative framework for fiscal management. It is divided into four sections: (1) clarity of roles and responsibilities, (2) public availability of information, (3) open budget preparation, execution, and reporting and (4) assurance of integrity. The OECD Best Practices for Budget Transparency are narrower and are divided in three parts: part I lists the principal budget reports and their content; part II describes specific disclosures to be contained in the reports and part III highlights practices for ensuring the quality and integrity of the reports. These two international standards are of course not binding but can provide guidance for development of national budget laws. At the same time we can observe attempts to measure budget transparency. In order to cover the entire spectrum of issues related to transparency construction of a transparency index seems appropriate. So far there have been developed several transparency indexes both in academic papers and by private nonprofit organizations, such as International Budget Partnership. The International Budget Partnership undertakes since 2004 the Open Budget Survey, which is compiled from a questionnaire completed for each country by researchers who are not associated with the government. Each country’s questionnaire is then independently reviewed by two anonymous experts and a government official. Based on the survey the Open Budget Index is computed. Together with a few other researchers I have been involved in the elaboration of the Czech part of the survey since the very beginning and now it has been already the sixth time. While in 2004 I had to browse through the extensive budget documentation in the library of the Ministry of Finance which at that time was one of the very few places where it was available for general public. Today I can answer the questions from my home, as all the documents are on the web. This is definitely an improvement. The work with the budget documentation became over the years quite easy. I know the structure well now, so I can find the answers easily. Of course, only if the particular information is presented. The differences between the years are negligible, which means that we do not succeed to add the missing but required information into the budget documentation. Budget transparency is defined as the full disclosure of all relevant fiscal information in a timely and systematic manner, thus there are three aspects of the disclosure: complete, timely and systematic. Evaluating the complexity, we have to admit that all the budget documents which are produced in the Czech Republic appear also on the web. However, a few documents required by the OECD Best Practices, such as Pre-election report, Long term report or Citizens budget are not produced at all. Especially the preparation and publication of the Citizens budget would show interest of the government in the budget transparency issue. The time, which passes between completion of a particular document and its publication, differs significantly for the different documents. While the executive’s budget proposal is available within a few days after its approval, the mid-year report is published with a significant delay, which is caused by the regulation in the law on budget rules. The law on budget rules requires that the quarterly and mid-year reports are published only after their acceptance by the budget committee or the Chamber of Deputies, respectively. Doe to this regulation the mid-year report for the year 2010 was published as late as in March 2011. Disclosure in a systematic manner means for me publication at one place, most likely the web pages of the Ministry of Finance. The current practice, when some of the budget documents are published on the web pages of the Ministry of Finance and the rest on the web pages of the Chamber of Deputies is quite confusing. Even when the Czech Republic is characterized as a country which provides significant information to the public in its budget documents, there are still many simple and cheap ways to improve budget transparency.
Pages: 4-7
Volume: 2011
Issue: 2
Year: 2011
File-URL: http://www.vse.cz/efaj/download.php?jnl=efaj&pdf=30.pdf
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Handle: RePEc:prg:jnlefa:v:2011:y:2011:i:2:id:30:p:4-7

Template-Type: ReDIF-Article 1.0
Author-Name: Mihály Hıgye
Title: Fiscal Consolidation and the New Flat Rate Individual Income Tax in Hungary
Abstract: In the last two years the Hungarian people have witnessed several new measures in government’s fiscal policy. To respond to global crisis that hit Hungary hard, the Bajnai government enacted a series of economic reforms and spending cuts in 2009. The Orban government elected in 2010 launched economic programs designed to promote growth by reducing administrative burdens on businesses and lowering the tax burdens on small businesses. The plan also includes strict control of budgetary expenditures, and a “crises-tax” on different sectors which would remain in effect for minimum 2 years. One of the most popular plans seems to be the launch of a “flat-rate” individual tax replacing the existing progressive tax aiming to increase supply of labor and so tax base, to improve tax compliance and the reduce cost of taxation. The paper analyses the recent changes from theoretical and practical views focusing on expected effects of the new flat rate individual income tax system. At first glance it seems to be that this new fiscal measure has just basically anti-consolidation effects on government budgetary position loosing significant revenues from income taxes. From international lessons it is expected that that there will be no Laffer-type behavioral responses generating revenue increases from the tax cut elements of the reform. The impact of the flat tax on work incentives might be expected only in short run. The flat rate reduces the flexibility of government to use tax rates as one of the “strong” weapons in budgetary policy when it becomes unavoidable. In many developed countries a wide range of tax expenditure is still applied in a more or less progressive personal income tax system. In a system where tax expenditures are widely used tax compliance may systematically improved if burdens and benefits are linked.
Keywords: Fiscal policy, Tax principles, Tax system, Flat rate tax, Social policy
Classification-JEL: H2
Pages: 8-27
Volume: 2011
Issue: 2
Year: 2011
File-URL: http://www.vse.cz/efaj/download.php?jnl=efaj&pdf=31.pdf
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Template-Type: ReDIF-Article 1.0
Author-Name: Sergii Slukhai
Title: M&E and Budget Program Performance Measurement in Ukraine: Current State and Needs for Improvement
Abstract: The key elements of a performance-based budgeting methodology have already become a part of the mechanism for public expenditure management in Ukraine. At the same time, there still remains the issue of linking budget expenditures to specific results achieved by specific budget programs which defines the necessity of applying modern approaches to carrying out M&E. This study presents an analysis of the current state of M&E in Ukrainian public expenditure program management and offers some solutions which could improve its functioning. The analysis has revealed the absence of rigorous selection of performance indicators to evaluate budget program implementation, a need to better institutionalize the monitoring and evaluation activities through functional differentiation of budget programs and changes in approaches to their assessment.
Keywords: Performance-based budgeting, Monitoring, Evaluation, Budget program, Major spending unit
Classification-JEL: H50
Pages: 28-47
Volume: 2011
Issue: 2
Year: 2011
File-URL: http://www.vse.cz/efaj/download.php?jnl=efaj&pdf=32.pdf
File-URL: http://www.vse.cz/efaj/32
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Template-Type: ReDIF-Article 1.0
Author-Name: Maria-Andrada Georgescu
Author-Name: Dana Mihaela Murgescu
Title: Labour Taxation and Personnel Expenditure in the Romanian Public Sector
Abstract: The global economic crisis, which had a strong impact on virtually all states of the world, brought additional challenges to the public sector. The governments had to choose between two alternatives: to decrease public expenditure by adopting austerity measures (option chosen by most EU Member States) or to increase public investments, in an attempt to stimulate economic growth (alternative preferred and supported by the US and Great Britain). The paper at hand aims to analyze the public expenditure policy in Romania, as a result of the economic conditions imposed by the crisis, with a focus on the relationship between the incomes collected from taxes on labour and the public expenditure with the personnel employed within public institutions. We shall analyze and compare the figures regarding public expenditure for the wages of persons working in the public sector in the years prior to the crisis and following the adoption of the austerity measures. At the same time, we shall analyze the corresponding numbers regarding the amounts collected from taxes on labour. The goal of the paper is to identify the possible connection between the reduction of personnel expenses and the decrease of the budgetary deficit, which was the intended purpose of the austerity measures in the field of public employees’ salaries. Since the labour tax is computed on the basis of the salary earned, we expect both the expenses with the personnel and the amounts collected from labour tax, to decrease. However, this decrease will be in different percentages. The paper will analyze if the final balance between expenses with salaries and labour tax is positive or negative, in other words, if the austerity measures helped improve the budgetary deficit or deepened it. The final part of the research focuses on a comparative analysis between the EU Member States, with respect to the levels of taxation on labour, the percentage of labour tax in the GDP, and the public expenditure with the personnel, in an attempt to show if there are certain similarities or differences between EU and/or NISPAcee States.
Keywords: Labour taxation, Public expenditure, Economic crisis
Classification-JEL: J38
Pages: 48-71
Volume: 2011
Issue: 2
Year: 2011
File-URL: http://www.vse.cz/efaj/download.php?jnl=efaj&pdf=33.pdf
File-URL: http://www.vse.cz/efaj/33
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Template-Type: ReDIF-Article 1.0
Author-Name: Gábor Kovács
Title: Municipal Bond Boom in Hungary: Focusing on the Analysis of Local Financial Management
Abstract: The drastic increase in volume of local government debt in Hungary started in 2006. My hypothesis assumes that a supposable improvement in local municipal financial management might resulted in the spread of bond issue, which in Hungary is still considered innovative. The paper is aimed at examining factors that might have been behind indebtedness, and tries to separate the effect of internal and external factors. Under the notion “internal factors” I mean whether potential issuers are adequately informed, professionally trained and motivated. Another aim of the research is to survey local governments' attitude towards bond financing as well, that is to determine factors not necessarily rational but sometimes subjective, which can result in impeding resource deployment through bond issuance. My research, which was based on a stratified sample of 308 Hungarian municipalities, came to the conclusion that expertise of local governments’ financial executives related to loan financing is extremely low. The majority of local governments is unable to distinguish the economic differences between bank loans and bonds, and is unclear concerning the potential benefits, advantages, and disadvantages of bonds. No wonder that nearly all the bonds were issued privately where the buyers were solely commercial banks. In addition, 12-18% of the municipalities has prejudices and clearly has misconceptions about obtaining funds through borrowing. According to the principal component analysis local governments’ knowledge level can be classified and explained by three components: theoretical knowledge of local borrowing, knowledge of legal and administrative regulation, and skill in capital market financing. By summing up the results it can be stated that the improvement in local financial management couldn’t have been the primary reason for municipal bond boom, but there were external factors that determined and dominated this process of booming.
Keywords: Local governments, Borrowing, Municipal bonds, Financial management
Classification-JEL: H72, H74
Pages: 72-92
Volume: 2011
Issue: 2
Year: 2011
File-URL: http://www.vse.cz/efaj/download.php?jnl=efaj&pdf=34.pdf
File-URL: http://www.vse.cz/efaj/34
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