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Principles of Fiscal Federalism - thomasfleiner.ch

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Principles of Fiscal Federalism - thomasfleiner.ch Powered By Docstoc
					Master course Compound System of Governance
               Thomas Fleiner




              Institutions of
              Federal States




                  Thursday:
                   Fleiner:
           Fiscal Decentralization
                    Income and
                    Expenditures

    Income                                  Expenditures


                                             Mandates
Taxes
             Legislation                      Investments




                                   Budget
Services                   State

Funds                                         Grants

Loan                                          Debts

 Transfer
                          Fiscal
      Centralized       Federalism      Decentralized

        Decision on                     Decision on
        most Taxes                      Fed. Taxes
Fed     Budget           Vertical        Fed. Budget
        Budget contr.    Equalization

           No autonomy Horizontal Autonomy Income
State      Income       Vertical
           Expenditures Equalizat. Autonomy Budget



          No autonomy     Horizontal
                                     Autonomy Income
Local     Income          Equaliz.
          Expenditures               Autonomy Budget
             Fiscal
           Equalization




            Federal




                                  Vertical
State   State     State   State


          Horizontal
                General Issues
                  with regard
                       to
               Fiscal Federalism

Strong decentralized states (Quasi Federal):
 Spain and South Africa
Rich and Small versus Big an poor
 Centralized decentralized federations
 Asymmetric Federations
 Cooperative Federalism
  Local Government
         Aus                       Ger
                 Braz     Can              Indi   Mal    Nige     Rus     Spai Sout
         trali                     ma                                                     CH     USA
                 il       ada              a      ays    ria      sia     n    h Af
         a                         n
Pop
          20     184       32       82     1090   24     924      144     40      47       8     296
Milli
Aerea
000      7687    8512     9985     357     3288   330    924      17075   505    1223     41     9631
km2

Cdp
capit
          32       4       35       33     0.7     5     0.5       4      24       5      37     42

                                   Coop           Dual   Coop             Dual   Coop
Fisc             Coop.
Fede
         dual    indep.
                          dual     Inter   dual   assy   Interd   dual    assy   Interd   dual   dual
                                   dep.           metr   ep.              metr   ep.
Local
Govt.     no     yes       no       no     yes    no     yes       no     no     yes      yes    no
Cst.
State
         stro    wea      stro     stro    stro   stro   stro     stro    stro   stro     stro   vari
contr
Loc.
         ng      k        ng       ng      ng     ng     ng       ng      ng     ng       ng     es

Rang
e loc
         limit exte       exte     limi    limit limit limit limit limit limit exte exte
Gvt.     ed    nsiv       nsiv     ted     ed    ed    ed    ed    ed    ed    nsiv nsiv

                          Strong   Stron
Equal    stron            Reven    g                                                             wea
izatio   g rev   fair              reve.   fair   fair   fair     fair    fair   fair     fair
n                         Disp.                                                                  k
         expe             reduc    s.exp
                      Financing
                   Federal Mandates

Traditionally: Fiscal powers for : Peace, Order and
Good Governance
Expansion: due to war and judicial
Interpretation Australia, USA
Threats of Secession: Russia, India
Combating terrorism racial equality: USA, miorities
Natural resource-management, environmental Pro-
tection: Brazil Nigeria, USA
Debt management fiscal discipline Brazil
 Common economy and welfare
 In General: unfunded or underfunded mandates
                         Taxing
                         Powers
Highly Centralized (75% or more): Malaysia,
South Africa, Australia
Centralized (60-75%): Brazil, India Russia, USA
Decentralized: (40 to 50%): Canada, Nigeria
Highly decentralized: (only 37%): Switzerland
Taxing competence:
      wide powers:     Switzerland, Canada, USA,
                       Nigeria
      restrained:      South Africa, Spain, Malaysia
                       Australia
 Expenditure competence:
       high:            Malaysia, Switzerland,
                        Germany, Canada, USA
       low:             India, Spain exept.aut.regions
                   Harmonization


Tax system is harmonized in:
                    Switzerland, Australia, Canada
                    Germany, Malaysia Russia
                    Spain
Not harmonized in:  USA, Brazil, India

Borrowing:           all federal States except
                     Nigeria, requires governmental
                     approval (Germany?)



 No race to the bottom, but also in some states
 competition
                Intergovernmental
                      Fiscal
                     Transfer
                   Reduction of
                  Regional Fiscal
                    Disparities

Three objectives:
        Bridging vertical fiscal gaps
        Bridging fiscal divide between nations
        securing a common economic union
        through establishing national minimum
        standards in social and infrastructure
        services.
                          Conclusion
 Clarity and Consensus for responsibilities
 Finance should follow function to strengthen
 Responsibilities
 To ensure fiscal discipline all governments must
 Be made to face the fiscal consequences of their
 decisions
 Securing a common economic union through unimpe-
 ded goods and factor mobility and national minimum
 standards for social services and infrastructure is the
 best guarantee for political and economic stability
 and regional convergence in the long run.
Properly designed intergovernmental transfers can
strengthen results based accountability and also enha
ce competition for the supply of public goods, fiscal
harmonization, state and local government accounta-
bility, and regional equity.
Institutional arrangements for managing intergovern-
mental conflicts play an important role in the smooth
working of a federal system.

				
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posted:2/10/2012
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