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.



Austria: The reform of the fiscal equalisation law

In 2008 the Austrian parliament endorsed a new fiscal equalisation law that changed the revenue mix of both the state and the local level, and amended federal funding for social benefits and the health care system (). The reform consisted of several elements: i) a transformation of most intergovernmental grants into a higher sub-central government (SCG) share in federal tax revenue; ii) an increase in intergovernmental transfers for mandated health care and social welfare responsibilities; iii) a change in the equalisation formula that allocates payments between small and large sub-central governments; and iv) a change in underlying population statistics. In addition, procedural legislation for levying taxes and fees was harmonised across the nine states. The 2008 fiscal equalisation reform was considered quite significant and also seems to have provided a push for a wider-reaching institutional and fiscal relations reform.


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