Urban Public Finance in Developing Countries - Assignment Example

1. Ten percent of the national VAT (Value-Added Tax) is devoted to paying a share of the cost incurred by provincial governments for infrastructure improvements to their water purification and distribution systems.

This is a Type A grant.  It is so because the amount concerned comes from the national tax that is allocated to the provincial government.  It is a form of shared tax that the central government provides regularly to the local government.

1. In order to promote primary and secondary education at the local level of government, the national government pays 50 percent of teacher salaries.

This is a Type K grant.  Given that the grant goes to teachers’ salaries, it is a form of approved expenditure to be reimbursed by the central government to the local government.  The control of funds is in the central government and it determines the distributable pool of resources.

III.      Every year the national legislature, in conjunction with the prime minister, determines how best to distribute ten percent of the national personal income tax to provincial governments.

This is a Type D grant.  It is a shared type of grant because it comes from the national tax.  It however under the discretion of the central government where the 10% incomes tax will be allocated that is why it is Type D which is an ad hoc type of shared tax.

1. Annually the national government determines the amount of aid it will provide to subnational governments. The distribution of this financial aid is based on population density, the percentage of citizens under the age of fifteen, and the average household income.

This is a Type F grant. This is an ad hoc transfer since it is under the central government’s discretion where to allocate the funds.  It is further classified under the formula type of ad hoc transfer since the division of funds for allocation will be based on the computation of certain objective criteria and elements, in this case, population density, household income, and percentage of citizens under 15.

1. Local governments received emergency aid from the national government to assist them with clean-up costs associated with a recent hurricane.

This is a Type K grant.  This is a type of reimbursable expenditure based on an emergency situation in a local unit.  The funds will be approved and will come from the central government and the funds to be allocated would be the total or partial cost needed by the local government.

1. Local governments receive 40 percent of the motor vehicle license fees collected by the provincial government. The fees are allocated to the local governments based on the percentage of motor vehicles in the province that is owned by residents in a particular local government jurisdiction.

This is a Type B grant.  It is a shared type of government fund but instead of being a national tax, the funds are from the provincial government collected from regular fees collected for the issuance of a motor vehicle license.  Forty percent is allocated to the local unit based on certain elements, in this case, the percentage of a motor vehicle owned by residents in a certain province.

VIII.   The legislature regularly provides some aid to provincial governments.  How best to allocate the money is left to the Minister for Internal Affairs.

This is a Type H grant. This is an ad hoc transfer since it is under the central government’s discretion where to allocate or whether or not to allocate the funds and the funds use is also ad hoc in nature.  It is further classified under the ad hoc type (type H) since the allocation of funds to the local unit will further depend on the discretion or approval of the central government, in this case, the Minister of Internal Affairs.

1. Annually the legislature considers whether to assist localities with their public safety expenses.

This is a Type H grant. This is an ad hoc transfer since it is under the central government’s discretion where to allocate the funds.  It is further classified under the ad hoc type (type H) since the allocation of funds to the local unit will further depend on the discretion or approval of the central government.  In this example, funds may or may not be given.  The legislature will decide on it annually, thus its ad hoc nature.