Template-Type: ReDIF-Article 1.0
Author-Name: Cristian Altavilla
Author-Name: Marcia Miranda Soares
Title:  Federalismo fiscal y desigualdad social en Argentina y Brasil
Abstract: Resumen:El trabajo analiza en clave comparada el federalismo fiscal en
Argentina y en Brasil desde la perspectiva de disminución de la desigualdad
social. El artículo realiza una revisión de la literatura especializada y efectúa
un análisis sobre la legislación y los datos fiscales para investigar cómo se
estructura la tributación, las transferencias intergubernamentales, los gastos
sociales y el endeudamiento público. La conclusión es que los dos países
presentan un alto grado de centralización fiscal, lo que propiciaría al
gobierno central minimizar las desigualdades sociales. Pero también presentan
problemas en el desempeño de la función redistributiva: regresividad de los
tributos, baja capacidad de ecualización de las transferencias
intergubernamentales, alta inestabilidad económica y endeudamiento público. Se
puede observar que el federalismo fiscal brasilero ha logrado ciertos avances
en el direccionamiento de los recursos para las políticas sociales y en el
control del endeudamiento público, mientras el federalismo argentino aún no ha
logrado avanzar en esta dirección.  Abstract:
This paper analysis in comparative perspective fiscal
federalism in Argentina and Brazil from the perspective of social inequality.
In doing so, the article reviews the specialized literature and analyses legislation
and fiscal data in order to investigate about the taxation structure,
intergovernmental transfer systems, the social expenditure and public debt. 
A central aspect of the variability of federalism is the
fiscal dimension, which has important effects on social inequalities. The way
in which taxation, intergovernmental fiscal transfers, social expenditures and
public indebtedness are structured is crucial in defining subnational autonomy
and intergovernmental relations. Social inequalities are sensitive to this
aspect, since the financing of universal social policies depends on the way in
which public resources are collected, distributed and invested by levels of government.
This paper shares the perspective of the variability of
federalism and, therefore, of its effects between countries, placing itself in
the field of fiscal federalism. Its objective is to present and compare the
effects of taxation, transfers, social expenditures and public indebtedness in
reducing the marked social inequalities present in the two countries that are
the object of this research: Argentina and Brazil. The hypothesis is that
federal experiences favor universal and fair social policies when taxation is
progressive and the central government concentrates power to define social
expenditures, acting inductively and redistributively to promote greater
territorial and social equity among the citizens. In other words, fiscal
centralization, understood here as the central government's power to regulate
and spend, is a condition for promoting more egalitarian social policies
throughout the national territory.
Argentine and Brazilian federations have been chosen
because they represent the most genuine federations today in Latin American
region and because they share the condition of realities marked by territorial
socioeconomic inequalities. Argentina is one of the federations with the
greatest horizontal asymmetry among its units in practically all socioeconomic
indicators, highlighting the disparities between the richest provinces of the
central-Pampas region and the poorest provinces of the Northeast and Northwest.
Brazil is also paradigmatic in this regard, since in 2017 it was among the
countries with the highest wealth and with the highest social inequality in the
world, with a clear contrast between states and municipalities in poorer
regions, such as the North and Northeast, and more developed regions, such as
Center-West, South and Southeast. Both countries also have similar aspects in
terms of fiscal federalism, specifically in terms of centralization, although
with important differences in relation to the promotion of territorial equity.
In the context of these countries, fiscal federalism may
or may not contribute to correcting inequalities. Based on this, then, the
following research questions arise: how is fiscal federalism structured in
these two countries? What are the potentialities and challenges that fiscal federalism
presents in reducing social inequalities? Which of these countries has the most
favorable institutional conditions to combat social inequalities? These are the
basic questions that animate this work and to answer them, the methodology
adopted was the review of the specialized bibliography on fiscal federalism in
both countries, analysis of documents, legislation and government data on
collection, taxes distribution, social expenditures and public indebtedness.
The work, therefore, has a rather exploratory, essayistic and comparative
character, since it seeks to present and relate the information and data on
fiscal federalism in Argentina and Brazil in order to analyze and conclude on
its equitable effects. The main contribution lies, above all, in the comparison
of these two cases of South American federations – a matter that has have
received little attention by the literature.
The conclusion is that the two federations show fiscal
centralization, this allows the central government to minimize social
inequalities. However, both countries have too some problems in the performance
of the redistributive function: regressive taxes, low equalization capacity of
intergovernmental transfers, high economic instability and public indebtedness.
The Brazilian fiscal federalism has made more progress in directing resources to social
policies and in controlling public indebtedness, since the Argentine federalism
has failed to advance in this direction.
Regarding the taxation dimension, which has been increasing
since 1990 and placed the two countries among those with the highest tax burden
in Latin America, we can observe that most of taxation is centralized at the
central government and it shows poor quality in progressivity. The challenge then
is to promote greater efficiency and well-being beyond the increase in social
spending financed with increasing taxation. In order to do so, a fiscal reform
that decentralizes income to the provinces, states and municipalities is
necessary. In addition, improving social justice requires important changes in
the tax base, and it is necessary to increase the share of income and profit, in
detriment of taxes on goods and services that compromise larger portions of the
income of the poorer families.
A second aspect that is similar in the two countries and that
poses, at the same time, great challenges, is the low power to correct the
fiscal gap between sub-national entities based on constitutional
intergovernmental transfers, since in both cases the transfer rules are not
very oriented towards correcting inequalities and are highly inclined towards
population criteria. 
A third aspect - which constitutes a great difference between
the countries analyzed - is the role of municipalities. In Argentina, local
entities collect little, are ignored in intergovernmental transfers and have a
small participation in social expenditures. In Brazil, on the contrary,
municipalization is a characteristic mark of fiscal decentralization that
followed the democratization of the country, with the local entity having a
growing participation in the supply of health, education and social assistance
services, with an increasing expenditure on social policies. This Brazilian
singularity points to challenges of intergovernmental coordination in the
management of social policies, something minimized by fiscal centralization,
which enables the central government to induce behavior based on legislation
and conditional resource transfers.
The four aspect related to social spending and takes into
account that more spending on social policies does not necessarily means more
social equity. It is necessary to define priorities and seek a more equitable
offer throughout the national territory, but also among citizens, regardless of
their location.
A fifth aspect, shared by both cases and with negative effects
on spending and social policies, is economic instability and public debt. The
two factors combined create difficulties for the sustainability of social
expenditures that, in contexts of economic downturn, compete with financial
expenses derived from high indebtedness. The strengthening of fiscal
responsibility in Brazil and its adoption in Argentina are conditions for
greater economic stability and sustainability of social expenditures. Both countries
need to define more stable sources of financing for policies such as health and
education, making them less susceptible to political and economic contexts. In
this sense, an “Emergency Fund” could be a measure to avoid abrupt falls in the
financing of social policies.
Following these
aspect, a general conclusion is that federalism in Argentina and Brazil does
not represent obstacles for the expansion of redistributive social policies
because their institutional design is configured in such a way that guarantee
fiscal power to the national government. In this sense, what was observed in
the first decade of 2000 is paradigmatic, when in a favorable economic and
political context, there was a considerable expansion of social spending. The
situation in Brazil seems more favorable, even though the country presents a
much worse social legacy, with marked inequalities. The central government,
when it presents a majority coalition of government, can regulate the
subnational governments. This made possible progress in regulating the
financing of social policies and in controlling public debt. Argentina, with a
greater bargaining power of the governors in the National Congress, has
difficulties in making decisions that may run counter to sub-national
interests. In addition, fiscal federalism has a precarious institutional
framework, since it is provisional, does not contain long-term agreements and
many times the agreements reached do not achieve effective compliance. Once
again, the recommendation is a clearer definition of the financing of social
policies, in order to better guarantee their progress over time.
Classification-JEL: R1
Keywords: Federalismo fiscal, Desigualdad social, Argentina, Brasil., Fiscal federalism, Social inequality, Brazil.
Pages: 121-152
Volume: 3
Year: 2022
File-URL: http://www.revistaestudiosregionales.com/documentos/articulos/pdf-articulo-2639.pdf
File-Format: Application/pdf
Handle: RePEc:rer:articu:v:3:y:2022:p:121-152