Fiscal decentralization in the Republic of Serbia

Abstract

After 2001 Serbia started the process of democratization and socio-economic transition. Within the overall reform of public administration and the public finance system, the process of fiscal decentralization has started to strengthen the position of local self-governments. Decentralization in every respect, and especially fiscal, is the most important assumption of local development. In order for the decentralized state to function well, it is important that these three forms of decentralization: political, administrative and fiscal, be well coordinated with one another. Fiscal decentralization refers to the collection and consumption of funds at various levels of government. The paper outlines the reasons justifying the process of fiscal decentralization, as well as the reasons that are against fiscal decentralization, i.e. the reasons that speak of the limitations it carries with it. The goal of properly implemented fiscal decentralization is to strengthen the role of cities and municipalities, as well as their fiscal autonomy, that the Republic entrusted the local authorities with numerous important competencies and that the local budgets are multiplied. Decentralization in Serbia has not progressed satisfactorily. Serbia put fiscal decentralization at the heart of public administration reform. Local self-government financing in Serbia changed in this period, which led to instability. Only in the period between 2008 and 2015 the legal frameworks of the system of financing of local self-governments changed several times and thus the process of budget execution and financial management at the local level was impaired. The mentioned changes in the legal framework for the ultimate consequence had the reduction of the budgets of local governments, which jeopardized their ability to perform their communal, investment and other functions.