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Recent Development of Municipal Finance in Selected European Countries

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  • Peter Friedrich

    ()

  • Anita Kaltschütz

    ()

  • Chang Woon Nam

    ()

Abstract

The idea of fiscal decentralisation has become increasingly fashionable world-wide. In some developed countries the systems of intergovernmental finance have evolved gradually and each country has unique features. Transition countries on different continents have had differing reasons and motivations for such reforms. More recently, the acknowledgement of subsidiarity as the basic principle for the European Un-ion, the introduction of the West German federal system in the eastern part of the country, the revival of regionalism in European countries are distinctive examples of the decentralisation process in Europe. Following the equalisation objectives, one tends to argue that those municipalities with greater spending needs automatically require more financial support from central or upper-level government. Yet, the sum of grants to municipalities should basically be induced from the comparison of their expenditure needs with local fiscal capacity from their own resources such as local tax revenues and fees. Surely the expenditure behaviour of municipalities is also, to a great extent, influenced by their present fiscal capacity and by the size of local debts. Four European countries were chosen to survey the recent development of local finance: the UK, Germany, Poland and Switzerland. This paper firstly identifies and highlights the similarities and differences in municipal finance in an international context. Secondly it theoretically examines the possibility of enhancing fiscal autonomy of local governments through increasing revenues from fees. Keywords: fiscal decentralisation, local expenditures and taxes, shared taxes, intergovernmental transfers, municipal borrowings, Poland, the UK, Switzerland, Germany

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa04p288.

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Date of creation: Aug 2004
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Handle: RePEc:wiw:wiwrsa:ersa04p288

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  1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 64, pages 416.
  2. Bev Dahlby, 1996. "Fiscal externalities and the design of intergovernmental grants," International Tax and Public Finance, Springer, Springer, vol. 3(3), pages 397-412, July.
  3. Worthington, Andrew C & Dollery, Brian E, 1998. " The Political Determination of Intergovernmental Grants in Australia," Public Choice, Springer, Springer, vol. 94(3-4), pages 299-315, March.
  4. Shah, Anwar & DEC, 1994. "A fiscal needs approach to equalization transfers in a decentralized federation," Policy Research Working Paper Series, The World Bank 1289, The World Bank.
  5. Brennan,Geoffrey & Buchanan,James M., 2006. "The Power to Tax," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521027922.
  6. Peltzman, Sam, 1971. "Pricing in Public and Private Enterprises: Electric Utilities in the United States," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 14(1), pages 109-47, April.
  7. Anwar Shah, 2008. "Fiscal federalism and macroeconomic governance : for better or for worse?," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 584, China Economics and Management Academy, Central University of Finance and Economics.
  8. Jan Tinbergen, 1961. "The Spatial Dispersion of Production : A Hypothesis," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), Swiss Society of Economics and Statistics (SSES), vol. 97(IV), pages 412-419, December.
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