Panel 7: Managing, Budgeting and Financing in the Public Sector Thursday, November 17 (10:15-11:30)

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Panel 7 Managing, Budgeting and Financing in
the Public Sector Thursday, November 17
(1015-1130)
12th Symposium on Development and Social
Transformation
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12th Symposium on Development and Social
Transformation
Panel 7 Managing, Budgeting and Financing in
the Public Sector
Performance Appraisal Systems in the Government
of the US and Lessons for the Government of
IndiaP. Ravi Kumar
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• The key to improving productivity and quality of
  services in the public sector is accurately
  measuring and controlling the performance of each
  worker ( Nigro and Nigro 2000134)

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BACKGROUND
Online real time tasked based performance
appraisal system
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Performance appriasal

• Criteria- what
• Result oriented .
• Behavioral approach.
• Trait evaluation .
• Task based approach

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Methodology

• Conduct How
• Narrative
• Rating scale
• On line
• Conduct when
• End of the year
• Shorter period say 3 months
• Real time

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IRS Model Leadership competancy model.
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Lessons

• IRS model has tripartite structure for HRM which
  exists on the Indian Railway personnel
  management. Learning here is focus on
  competencies and its integration with LCM.
• Employee is consulted.
• Job is broken up into critical , non critical and
  additional elements.

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LESSONS ( Cont..)

• PAY FOR PERFORMANCE
• Merit pay
• Bonus and incentives
• Break away from entitlement culture.

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12th Symposium on Development and Social
Transformation
Panel 7 Managing, Budgeting and Financing in
the Public Sector
Latin American Index of Budget Transparency The
case of PeruTamiko Hasegawa
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INTRODUCTION

• Transparency in public expenditure is
  particularly relevant given the central character
  of the budget of any government.
• The true objectives, commitments, and priorities
  of those in control of the government are
  tangibly expressed in the budget.
• Promotes restrained use of public resources,
  reduces margins of discretion with which the law
  is interpreted, and impels honest and responsible
  behavior in the exercise of public
• authority.

Why budget transparency is important?
Measure the degree of transparency in national
public spending and facilitates over time
comparisons between countries. Update
existing knowledge on the budget process and the
importance of transparency in this field.
Identify the areas of the budget with less
transparency so that governments may work on
concrete solutions
Objectives of the study
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INTRODUCTION
METHODOLOGY

• Academic Researchers
• Civil Society Organizations
• Legislators
• Media

• A survey completed by experts and users of budget
  information, evaluating their perceptions with
  respect to transparency.
• An analysis of practical conditions of the budget
  process.
• A guide to link the perceptions survey and the
  practical questionnaire.

• Argentina
• Colombia
• Costa Rica
• El Salvador
• Guatemala
• Mexico
• Nicaragua
• Peru

COUNTRIES
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GENERAL INDEX OF BUDGET TRANSPARENCY
The General Index of Budget Transparency (score
from 1 to 100)
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THE CASE OF PERU
Ranking of variables ( of positive responses)
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THE CASE OF PERU

Information on macroeconomic criteria
Authority and participation of the Legislature
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THE CASE OF PERU
Evaluation of internal comptroller
Capacities of external oversight institution
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THE CASE OF PERU
RECOMMENDATIONS
Capacities of internal and external auditing
institutions Disseminate more extensively the
reports that verify whether the
Executive complies with the physical goals of
budget programs. Present results in a way that
is understandable and easily accessible to
the population. Clearly establish how the
stipulated recommendations are implemented and
how they help to fight corruption.
Citizen Participation in the Budget Increase
the mechanisms available to incorporate opinions
during the budget approval stage. Increase the
monitoring of activities related to transparency
at each stage of the budget process. The
Executive must prepare and disseminate reports
that detail the impact of spending. Prepare a
Citizens budget, a user-friendly document that
ensures greater understanding of the budget-
recommended by OECD.
Timeliness of Budget Information Improve the
dissemination and timeliness with which budget
information is made public during the oversight
stage.
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12th Symposium on Development and Social
Transformation
Panel 7 Managing, Budgeting and Financing in
the Public Sector
Policy for Levy of Consumption Taxes During
Inter-jurisdictional Movement of Goods in a
Federal StateManish Gupta
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Inter State Transaction

• Definition Indian Constitution
• When a sale purchase transaction causes
  inter-state movement of goods

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Taxation Policy Dilemma

• To Tax or Not To Tax
• (the interstate transactions)

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Why Not to Tax?

• Every State Government wants its Industry and
  Commerce to prosper, and thus remain most
  competitive, when selling outside the state.
• Avoid Double Taxation (because the product will
  suffer tax in the State of consumption again)
• Taxing causes border congestions border
  adjustment problems

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Why To Tax?

• IF WE DON TAX (Interstate Transactions),
• Consumer can buy directly from Outside State
  vendors and avoid tax.
• Business of local trade and commerce suffers (as
  it has to pay tax)

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Indian Situation

• Tax Business to Consumer Sale
• Dont Tax Business to Business Sale
• Problem How to differentiate between the two?
• Declaration Form C

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Problem with C Form

• Cumbersome Paperwork
• Harassment by purchasing dealer
• Corruption in issue of C Forms
• Difficulty in completion of self assessment

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Situation in US

• Use tax when consumer directly purchases from
  outside State
• Business to Business Transaction are not taxed.
• Inter-state Cooperation mechanism for information
  enforcement
• Problem Non Reporting by Consumer/ Businesses
• Businesses prefer low tax States
• Evasion / Avoidance through Internet etc.

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System in EU

• Local sale Imports are taxed
• Exports zero-rated (on basis of export proof)
• Information Sharing Enforcement Mechanism
  between member countries
• Problems-
• Un-necessary Refunds
• Border congestions
• Information overload Enforcement problems

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Proposed system in EU

• All transaction to be taxed.
• In case of Inter-state transactions, tax remitted
  to clearing house.
• Purchasing Dealers Country gives credit to the
  tax paid earlier (to the Clearing House)
• Every Quarter, EU Clearing House calculates the
  net (remitted credited) and pays to the country.

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Lessons for India

• USA is having a similar provisions as are
  existing in India. US too is facing similar
  problems.
• EU has VAT (and so has India now), and thus,
  credit system can easily be integrated in
  Indian VAT.

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Lessons for India (contd..)

• Federal Government can easily act as Clearing
  House
• This system totally removes paperwork, and
  loopholes for evasion.

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12th Symposium on Development and Social
Transformation
Panel 7 Managing, Budgeting and Financing in
the Public Sector
Transfer pricing policies in MexicoYogesh
Kumar Verma
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Definition

• The internal transactions of all sub units of an
  organization with respect to the exchange of
  goods and services constitute transfer pricing
  and values are denoted to these transactions to
  ascertain the earnings and performance etc. In
  fact, it is an important resource for the setting
  up of the management information system.

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Objective

• The guiding objectives in using the transfer
  pricing for tax determination are prevention of
  tax avoidance through manipulation of pricing
  techniques, prevention of international double
  taxation and appropriate inter country allocation
  of taxes application certainty plus
  administrative feasibility of law of transfer
  pricing.

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Arms Length Principle

• Any intra corporation transaction between two
  arms of a company that is subjected to the
  transfer pricing must be made comparable to any
  independent business transaction between two
  entities interacting on the basis of pure
  commercial tenets and such comparisons form the
  basis of transfer pricing based assessment of
  internal transactions within the companies across
  the divisions and cross country business arms.

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Methods of Transfer Pricing

• Comparable uncontrolled price method,
• Resale price method,
• Cost plus method,
• Profit split method,
• Residual profit split method
• Transactional operating profit margin method.

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• Mexico started enforcing its transfer pricing
  legislation two years after its enactment, to
  allow familiarization with the new law.

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Issues

• Comparability and adjustments Due to the
  limitations of data base these basic factors are
  affected

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Policy Issues

• Comparability
• Flexibility
• Hierarchy
• Maquiladora

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ISSUES

• i)Developing strong data base of comparables on
  spatial and temporal basis,
• ii)Increase in time limits for assessment
  completion
• iii)Concept of Safe Harbouring for the smaller
  tax payers
• iv)Transparency of the proceedings and
  innovations and improvements in the transfer
  pricing assessments like functional analysis are
  called for apart from Comparability and
  Customisation of taxation provisions in India.

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• A maquiladora is a Mexican subsidiary company,
  usually 100 foreign-owned, whose primary role is
  assembly. Maquiladoras are usually structured as
  costs centres, with marginal profits. The
  maquiladora industry as a whole contributes a
  vast amount to Mexican trade. The PE exemption to
  the maquiladora for income tax purposes was a
  contributing factor.

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12th Symposium on Development and Social
Transformation
Panel 7 Managing, Budgeting and Financing in the
Public Sector Thursday, November 17 (1015-1130)
P. Ravi Kumar Performance Appraisal Systems
Tamiko Hasegawa Latin American Budget Transparency
Manish Gupta Policy for Levy of Consumption
Yogesh Kumar Verma Transfer Pricing Policies in Mexico