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Fiscal Federalism 2016

Making Decentralisation Work

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Fiscal Federalism 2016 surveys recent trends and policies in intergovernmental fiscal relations and sub-central government. Accessible and easy-to read chapters provide insight: into growing spending and tax devolution; the fiscal constitutions of federal countries; how immovable property taxation is regaining its former significance; on the true spending power of sub central governments; on the mix between own tax resources and intergovernmental grants; and on the role of fiscal rules and good budget frameworks for sustainable debt management at the state and local level.

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Fiscal constitutions

Fiscal constitutions comprise the sets of rules and frameworks that guide a country’s fiscal policy and are enshrined in its fundamental laws. This chapter compares the fiscal constitutions of 15 federal countries by empirically assessing frameworks of intergovernmental relations. It looks at such aspects as the responsibility of sub-national governments for their own policies, their power to shape fiscal policy at the federal level, the strength of intergovernmental budget frameworks, and the stability of fiscal policy arrangements. The chapter also gives a detailed account of how fiscal constitutions evolved between 1917 and 2012, describes historical turning points, and identifies potential drivers of constitutional reform. It then assesses the link between constitutional frameworks and fiscal outcomes, suggesting that the coherence of constitutional arrangements – i.e. the way in which fiscal constitution elements and building blocks fit together – is a crucial factor in the long-term sustainability of public finances. Finally, the chapter suggests a number of policy reform options for making fiscal constitutions more coherent.

English

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