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Making Fiscal Decentralization Work in Vietnam (2005)

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Abstract

Vietnam is a poor country with large and increasing needs in infrastructure, education, health, and other areas of the public sector. The current policy of the Government of Vietnam (GOV) is not to increase tax effort, but actually to reduce it. Recently, the GOV has cut the rates of several taxes with the goal of making Vietnam’s exports more competitive internationally and to attract more foreign direct investment. Tax revenues will be further cut in the near future as the GOV prepares for accession to the WTO by reducing the level and dispersion of customs tariff rates. The large current needs for additional public funds and the plans not to increase taxes, or actually to decrease them, present the GOV with a significant policy dilemma. Possibly the only non-inflationary solution to this dilemma is to increase the efficiency and effectiveness of the entire public sector. Because Vietnam has significantly decentralized expenditure responsibilities to the provincial and local governments (the share of subnational governments in total expenditures is around 40 percent; see Table 1), the GOV decentralization policy takes special importance in the overall drive for greater efficiency and overall fiscal balance of the public sector. The ability of the GOV to increase the quantity and quality of public services lies largely in a more efficient and equitable system of decentralized finance. This is the fundamental reason for assessing in this chapter of the Public Expenditure Review (PER) the ongoing decentralization process in Vietnam.

Suggested Citation

  • Jorge Martinez-Vazquez, 2005. "Making Fiscal Decentralization Work in Vietnam (2005)," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0513, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  • Handle: RePEc:ays:ispwps:paper0513
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    File URL: http://icepp.gsu.edu/files/2017/09/ispwp-0513.pdf
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    Cited by:

    1. Phuong Nguyen-Hoang, 2012. "Cost function and its use for intergovernmental educational transfers in Vietnam," Education Economics, Taylor & Francis Journals, vol. 20(1), pages 69-91, June.
    2. Nguyen, Hoang-Phuong, 2008. "What is in it for the poor? Evidence from fiscal decentralization in Vietnam," MPRA Paper 9344, University Library of Munich, Germany.
    3. Jürgen Brünjes & Javier Revilla Diez, 2013. "‘Recession push’ and ‘prosperity pull’ entrepreneurship in a rural developing context," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 25(3-4), pages 251-271, April.
    4. Brehm, Stefan, 2013. "Fiscal Incentives, Public Spending, and Productivity – County-Level Evidence from a Chinese Province," World Development, Elsevier, vol. 46(C), pages 92-103.

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    Keywords

    Vietnam; fiscal decentralization;

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