Reforming Fiscal Federalism and Local Government

Beyond the Zero-Sum Game

image of Reforming Fiscal Federalism and Local Government

This book describes and examines reforms of fiscal federalism and local government in 10 OECD countries implemented over the past decade. The country chapters identify common patterns and factors that are conducive to reforms of the intergovernmental fiscal framework, using a common methodological approach. The summary chapter highlights the cross-cutting issues emerging from the country chapters and shows the key factors in the institutional, political, economic and fiscal areas that are supporting reform success. The report’s approach results in valuable insights for policy makers designing, adopting and implementing fiscal federalism and local government reforms.



Australia: The Intergovernmental Agreement on Federal Financial Relations

On 29 November 2008, the Australian government (hereafter Commonwealth government) and the states and territories (the states) agreed on an Intergovernmental Agreement on Federal Financial Relations that came into effect on 1 January 2009 and profoundly changed Australian fiscal federalism. The agreement provided an overarching framework that aims at improving the quality and effectiveness of public service delivery in Australia. The Intergovernmental Agreement consisted of three pillars: i) an increase in the states’ flexibility in service delivery; ii) more state accountability to the public for the quality and effectiveness of services; and iii) a considerable increase in the amount of federal funding for some key services. The Intergovernmental Agreement built on previous reforms such as the introduction of the Goods and Services Tax in 2000 and is generally considered to be one of the widest-reaching reforms in the history of Australian intergovernmental fiscal relations (see ).


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