Intergovernmental transfer in Thailand : a test of horizontal equity

Abstract

This research proved the existing fiscal equality of the intergovernmental grant allocation. The research objectives were 1) to investigate the intergovernmental transfer in Thailand and to test the hypothesis on horizontal fiscal balance among the local governments, 2) to conduct a qualitative study with an emphasis on general grant and specific grant allocation in order to strengthen the horizontal fiscal balance, and 3) to provide recommendations to policymakers and concerned parties on the ement of grant allocation. The mixed method was used to inves horizontal equalization at all local government levels, especially the lower-tier, throughout the country. The units of analysis were Provincial Administrative Organizations (PAOs), Municipalities, and Subdistrict Administrative Organizations (SAOs). Data were collected for a period of four fiscal years from 2009 to 2012, and were based on the records of the Department of Local Administration under the Ministry of Interior. The general grant was the main variable because it is used to fix local government fiscal imbalances which supplement inadequate local own-source revenues in order to enhance the ability of local governments to meet their expenditure responsibilities. The results confirmed the following 1) General grant allocation was not inverse with local government revenue; in other words, general grant was not delivered to local government with lower revenue capacity. 2) The inequality still remained in local administrative organizations; the disparity was declined only 0.04 er general grant allocation. 3) Allocation created more fiscal inequality among some types of local administrative organizations, and among some regions. 4) In term of the highest fiscal inequality, by types of local administrative organization and by region, it was Sub-district municipalities, and the East respectively. 5) The measure of specific grant allocation created more fiscal inequality. The different methods or channels, either regular or irregular, to obtain special grant allocation, resulted in fiscal inequality. The impacts of grant allocation are the limiting of fiscal autonomy of local governments, unpredictable budget, not narrowing fiscal gaps, and motivating pork barrel as the discretion on (specific) grant allocation. Recommendations for the reduction of fiscal disparities were 1) to develop an equalization transfer-formula, 2)to reduce some specific grant projects, and 3) to improve the institutional arrangement for fiscal transfers.