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Financing Local Government

image of Financing Local Government
Decentralisation is now taking place in the public administrations of most countries of the world. A critical determinant of the effective performance of local governments is finance – their ability to both mobilise financial resources and to use those resources effectively and efficiently.



This book explores the variety of methods used to ensure that fiscal decentralisation takes place alongside administrative decentralisation. It considers the range of revenue sources available, the design systems of intergovernmental transfers between central and local government, and the kinds of rules and procedures necessary to ensure that local governments use their financial resources appropriately.



The experiences described in this book will help local government managers, and national policymakers charged with local government finance issues, to ensure that they follow good practice in their own programmes of local government reform.

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Local Revenue Administration

Tax reform requires improvements in tax administration as much as reform of tax policy (Bird and de Jantscher, 1992). The design of suitable local revenue sources (local taxes, charges, fees, etc.) must be matched by the ability of local government to administer and collect the revenue. In practice, in many developing and transition countries, performance in revenue collection is extremely poor. For the purposes of this chapter, we will refer primarily to local taxes, but the issues are similar for other revenue sources, and for all sub-national levels of government.

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