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[IWS] OECD: FISCAL FEDERALISM 2014: MAKING DECENTRALISATION WORK [2 December 2013]
IWS Documented News Service
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
Organisation for Economic Cooperation and Development (OECD)
FISCAL FEDERALISM 2014: MAKING DECENTRALISATION WORK [2 December 2013]
[full-text, 136 pages]
This book offers an overview on recent trends and policies in intergovernmental fiscal relations and sub-central government. Accessible chapters provide: insight into how sub-central governments are managing ongoing consolidation, as well as how fiscal decentralisation fosters economic growth and educational attainment; a balanced account of the virtues and limits of tax competiton between jurisdictions; an overview of fiscal equalisation policy; and some fascinating background information about past tax and public service reforms.
Press Release 2 December 2013
Making fiscal decentralisation work
02/12/2013 - Hundreds of thousands of elected sub-national governments worldwide provide services and levy taxes on residents and companies. The trend towards decentralisation over the past 20 years has increased their capacity to affect the economic and fiscal course of their country, while the global economic crisis has created new challenges for balancing budgets at all levels of government.
, says that better collaboration between all government entities is needed to rein in budget deficits, improve the efficiency of taxation and spending and bring about a fair sharing of fiscal burdens.
The report will be presented during the 3-5 December meeting of the , in Marrakech, Morocco, on . It provides an overview on recent trends in inter-governmental fiscal relations and points out the uneven developments seen in the decentralisation process.
Spending decentralisation has far outpaced revenue decentralisation, according to the report. While around one-third of government spending and two-thirds of public investment is carried out by the sub-central level, less than 15 percent of tax revenues go to the sub-central level.
These imbalances are generally seen as an obstacle to sub-national accountability and good fiscal performance. The breakdown of clear links between sub-national service provision and its financial consequences for the electorate is commonly seen as a key driver of sub-national fiscal profligacy and soft budget constraints.
Well-functioning intergovernmental frameworks can lead to better economic and fiscal outcomes. Appropriate decentralisation of the public sector, and bringing the state closer to the people, can also help restore trust in public policies and create consensus required for the hard decisions facing most governments, according to the report.
Among other highlights, the report notes the positive association between decentralisation and GDP per capita and discusses the virtues and limits of tax competition between jurisdictions. It also explains how fiscal equalisation - a key social ingredient of fiscal federalism - can help to eliminate differences in regional wealth, although these systems can, in some cases, also reduce the regions’ development efforts.
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