Fiscal decentralisation is one dimension of decentralisation. Fiscal decentralisation is of crucial relevance for the overall decentralisation design. Effective decentralisation is only possible if all levels of government and all units of government have adequate access to resources. The sharing of wealth and income between state levels and between the decentralised units is a prerequisite for multilevel governance. Every level of government and every unit of government should have own funds with which it can finance the services it wants to provide.
The different units of government can have funds from taxes, duties and fees, from own (public) property (e.g. Natural resources) or own commercial activities, from grants, transfers, donations or from borrowing.
For the sharing of revenue four aspects are of primary importance: the attribution of the revenue source (who can raise e.g. royalties from natural resources or taxes), the determination of the rates (e.g. who determines the tax rate, the height of royalties), the collection of the revenues (who collects the revenues and can grant exemptions) and the distribution of revenues (how will the revenues be calculated and distributed). Responsibilities for these different aspects can be attributed to different state levels. Only an analysis of all three issues can give some understanding of the level of fiscal decentralisation. Huge influence on fiscal decentralisation have also the budgetary procedures and the spending power.
The attribution of funds should go hand in hand with the attribution of powers. Both are interlinked. Imbalances in the distribution of funds and of powers are detrimental to the functioning of the overall design. A focus on finances without regard to the distribution of powers as well as a focus on powers without proper regard to the distributions of funds can have negative effects.
International Research and Consulting Centre | 2016 | Western Balkans, | Key Reading
Compilation of country analysis' concerning the status of fiscal decentralisation in the Western Balkans.
SDC | 2008 | Global, | Key Reading
Working objectivs and and methods of the Fisical Decentralisation Sub Group
This study analyzes the extent to which the issues of fiscal policy and tax reform prevail in the policy dialogue between SDC and partner countries and to what extent they constitute priorities in partner countries.
d.i.e German Development Institute | 2009 | Global, | Key Reading
Concept, Determinants, Sequencing Strategies on Local Governance & Decentralisation
SDC | 2009 | Global, | Key Reading
Summary of preliminary findings in order to seek further guidance which aspects shall be further developed in the final report.
The study shall analyse intergovernmental fiscal relations in a number of countries, where DPWG-LGD members are active and produce recommendations on two levels: (i) Simplification and optimisation of fiscal systems and (ii) harmonisation of development partners’ interventions.
Study in the area of Fiscal Decentralisation with a focus on local taxation, in order to produce recommendations on two levels: (i) Simplification and optimisation of fiscal systems and (ii) harmonisation of development partners’ interventions.
