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.



Portugal: The reform of the Local Finance Law

In January 2007, a new Local Finance Law came into force, whose objective was to increase the equity and efficiency of sub-central public finances, while being financially neutral for the central government (). One of the main aims of this reform was to tighten the budget constraint and to reduce the revenue dependence of municipalities on immoveable property. In particular, municipalities relied heavily on housing transaction fees as a revenue source, which gave local governments an incentive to grant building licenses that led to urban sprawl. Another objective was to reduce corruption and other illegal practices at the local level. Finally, the reform aimed at increasing equity by correcting flaws in the previous 1998 Local Finance Law, which were seen as favouring small municipalities over larger ones.


This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error