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Assessments of the Effectiveness of the Croatian Fiscal Equalisation Model

Author

Listed:
  • Anto Bajo

    (Institute of Public Finance, Zagreb)

  • Mihaela Bronic

    (Institute of Public Finance, Zagreb)

Abstract

No detailed analysis of the fiscal and economic inequalities of local units (at the municipality and city level) in Croatia has ever been published. The Government and the Finance Ministry have endeavoured by tax sharing, allocations of current grants and personal income tax refunds to palliate the differences in the fiscal capacities of local units. However, at the same time the fiscal capacities have not been properly calculated, because during the definition of the criteria for horizontal fiscal equalisation no care has been paid to the economic inequalities nor has there been proper establishment of the way local units belong to a special financing system. The paper, then, tests out the hypothesis that the existing Croatian model of horizontal fiscal equalisation is ineffective, for the Government and the Finance Ministry do not, with their poorly targeted financial instruments (personal income tax sharing, current grants and personal income tax refunds), manage to bring about palliation of the differences among the fiscal capacities of the local units, on the contrary, they tend to increase them.

Suggested Citation

  • Anto Bajo & Mihaela Bronic, 2007. "Assessments of the Effectiveness of the Croatian Fiscal Equalisation Model," Financial Theory and Practice, Institute of Public Finance, vol. 31(1), pages 1-26.
  • Handle: RePEc:ipf:finteo:v:30:y:2007:i:1:p:1-26
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    File URL: http://www.ijf.hr/eng/FTP/2007/1/bajo-bronic.pdf
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    Cited by:

    1. Mihaela Bronic, 2010. "Evaluating the current equalization grant to counties in Croatia," Financial Theory and Practice, Institute of Public Finance, vol. 34(1), pages 25-52.

    More about this item

    Keywords

    fiscal equalisation; tax sharing; personal income tax; personal income; tax refund; fiscal capacity; Croatia;

    JEL classification:

    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing

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