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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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Spending power of sub-central governments

A common way to compare and assess sub-central spending power – defined as the extent of control that sub-central governments exert over the budget – is the share of sub-central in general government expenditure. Yet upper-level government regulation can powerfully shape sub-central spending and jurisdictions may lose their discretionary power over various budget items. This chapter provides evidence of sub-central jurisdictions’ restricted power over their own spending and of the potentially negative effects on public service efficiency. It then goes on to develop a novel approach for measuring true sub-central spending power and looks at the results of a pilot study carried out in a number of countries in 2009. The new approach might be extended to all OECD countries in the future, thereby helping to re-design the assignment of spending responsibility across all tiers of government.

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