In the terms of decentralization and local autonomy, increase of financial capacity, is the result of more use of fiscal and financial instruments, as well as increasing the effectiveness work of the local government. They are facing a series of complex issues related to the functions they have to carry and their financial capacities against these needs. Local Government Units in Albania have few funds to fill the needs for financing great projects mainly infrastructure, so in this paper we aim to analyze the financing instruments of local government. Borrowing from financial institutions and second level banks is the main financial instrument for Local Government to financing their great investment for the community. This is a new financing instrument for LGUs in Albania that is considered as a strong financial lever to enable the financing of their budgets and great projects capital investment. Another instrument are guidelines constructed in similar models and experiences of countries in political and economic tradition with that of Albania, the issue of bonds of LG / municipal bonds which are regulated by laws. Programs of international agencies to support lending to the local government is also another a significant financing instrument for LGUs in Albania to fulfilled their needs. DOI: 10.5901/ajis.2016.v5n3s1p387
Objectives: This study is aimed at analyzing various facets of Fiscal Federalism and its impact on the growth of states in India. Methods/Analysis: The Study proposes a model to test the impact of autonomy and hard budget constraints, two important features of decentralization, on the economies of the states. The model has been analyzed using the Fixed Effects Least Squares method for panel data using EViews. Findings: The results point out quite a few aspects of the impact of fiscal federalism on Indian states. The paper concludes by giving possible reasons for the negative relation between autonomy with growth and the positive relation between central grants with growth. The fact that the OwnTax ratio is negatively related to the GSDP growth rate shows that the level of autonomy of a state is negatively related to the growth of the state. The study also revealed a high dependence of the states on the grants and tax sharing mechanisms for growth. It was found that the central intervention in the states’ economy was positively related to their growth, which points to soft budget constraints on the states which depend highly on the central government to finance their spending. The overall level of decentralization was also found to be quite poor, though the relationship is not very economically significant. Applications/Improvement: The Study highlights that trade-off between the autonomy and budget constraint aspects of fiscal federalism needs to be a major concern and work area for policy makers in India.Keywords: Economic Growth, Fiscal Federalism, Tax
(ProQuest: ... denotes formulae omitted.)IntroductionThe existing literature have concluded that foreign resources have played significant role in raising the pace of economic development in developing countries. Most of the developing countries have been facing shortage of resources failing to meet the rising demand of capital over time. In order to overcome this problem these countries have been receiving heavy doses of external resources in the form of loans and grants from developed countries and international financial institutions World Bank, IMF and Asian Development Bank. The developing countries depend on foreign aid due to the desire of achieving rapid pace of economic development in the shortest period of time. Furthermore, for bridging their saving investment gap and export import gap these countries are forced to receive foreign aid from foreign sources. On the other side, developed countries provide loans and foreign assistance to developing countries keeping in view that developing countries cannot borrow from commercial sources due to their limited debt servicing capacity.Oates (1972) stressed that decentralization is one of the important factors which helps the donor countries in transferring resources because the government officials of recipient countries can make correct and appropriate decisions regarding the development projects as decentralization helps in bringing government and people closer. There are two serious problems which may come up in this regard. Firstly, it is very difficult to know about the real needs of the society. Secondly, allocation of the resources under political pressure to meet these requirements is not an easy task.The resource allocation in developing countries remained controversial due to the political pressure and conditions attached to foreign aid. The need for decentralization, comes up because of the existence of gap between spending needs and availability of revenue. There are three levels of government working in Pakistan and the allocation and distribution between them remained under debate. There exists a well-defined process through which resources are redistributed to provincial government by the federal government through National Finance Commission (NFC).The introduction of new formula in 2009 for the share of all provinces in the dividable pool has altered significantly. In the 1990 the Punjab's share was 57.87 according to NFC award based on the population, while there was an insignificant decline observed in 2006. There is decline in the share of Punjab recorded from 57.37 percent in 2006 to 51.74 percent in 2009. The share of Sindh has gone up from 23.71 percent in 2006 to 24.55 percent in 2009. The share of KPK has gone up from 13.82 percent in 2006 to 14.62 percent in 2009. The Baluchistan's share has increased to 9.09 percent on the basis of the revised formula.Several studies have analyzed the effect of foreign aid, fiscal decentralization on economic growth but there is no consensus among the researchers regarding the role of decentralization in economic growth.Easterly (2003) concluded that corrupt institutions having weak policies had adverse impact on foreign aid in achieving its desired objectives. Morrissey (2006) stressed that private investment has appeared to be inversely related to imports and directly related to foreign aid. Aurangzeb (2010) failed to find the evidence related to the impact of foreign aid on economic growth in Pakistan. Javid (2011) concluded that foreign aid may have positive effect on economic growth in Pakistan only in the presence of sound economic policies. The present study is highly important as the results of this study would help the policy makers to formulate and implement better policies consistent with the economic and political conditions prevailing in Pakistan.The rest of the study is organized as follows. Section-II presents theoretical framework. Model specification and interpretation of results are presented in Section-III. …
Recently, fiscal decentralization, which involves the devolution of government fiscal responsibilities to lower levels of government, has been discussed in many developed and developing countries. In particular, the effect of fiscal decentralization on economic growth is a key issue in recent theoretical and empirical studies in public finance. The empirical evidences produce mixed results. In this study, the effect of fiscal decentralization on economic growth in a sample of several provinces will be explored. A province study offers several advantages: a bigger sample of data is available for province than for Indonesia; and panel data estimation is able to adjust the cultural, historical, and institutional differences and also to capture the local heterogeneities. By adopting a production-function-based estimation framework, the empirical estimation is done on a sample of cross section data that comprises of 26 province governments and the time series yearly data from 1992 to 2002. The Generalized Least Square method is used to test these data. The results indicate that: first, the fiscal decentralization variables (expenditure indicator) show the positive and significant coefficients, while, the revenue indicator shows the negative relationship with economic growth. Hence, several policy implications can be derived; i.e, the local government should be able: to increase their non taxes revenues; to create conducive conditions for capital inflows; and to develop a clear framework for fiscal decentralization assignment such as income redistribution and borrowingJEL classification: E60; E62; H62; H63; 04Keywords: province government financing; fiscal decentralization;localautonomy;fiscal policy; economic growth; cross-province data;
The dichotomy between pay-as-you-go (taxation financing) and pay-as-you-use (debt financing) methods of financing municipal projects, etc, is the area of concern in this paper. While there arc advantaees and disadvantages to both forms, debt financing carries a considerable amount of baggage known as interest. Interest or usury has been a concern of economic and religious thinkers through the ages. Given the potentially negative effect this has on the debtor, Indonesia is forewarned as it decentralizes fiscal administration to local governments. Besides reliance on taxation financing, an alternative public debt option is highlighted.
Spatial interaction among local governments in fiscal setting decisions is receiving increasingly attention in the applied public economics literature. Spatial interaction models rely on the presence of an externality from local budget making, that is external effects originate from inter-jurisdictional resource flows due to tax competition for a mobile base, or from local public expenditure spillovers into neighboring jurisdictions. Similarly, the intergovernmental grants competition exists when there is a rivalry among local governments to get them from central government. This paper attempted to identify how great the fiscal competition among local governments in Indonesia. Using spatial statistics, we concluded that the fiscal competition among municipalities was greater compared to the pre fiscal decentralization period. It seems that the local tax setting and expenditures decisions in particular municipality can be attributed to the mimicking behavior to neighbor regions. Also, we found that the fiscal competition among municipalities could be attributed negatively to the fiscal disparity. Those imply that in the regional autonomy era the local governments tend to increase their local own revenue intensively and demand for intergovernmental grants in order to finance their expenditures. In the long run, they could lead to the high cost economy, worsening fiscal dependency, and inefficiency of local government expenditures. Those findings above suggest that the distribution of intergovernmental transfers among regions should consider the local tax effort and the services minimum standard plays an important role to achieve the efficiency of local government expenditures.
This study aims to analyze the relationship between fiscal decentralization, fiscal capacity, financial independence and financial expenditure areas in achieving social justice. In this case, the East Java Province Indonesia is supported by the existence of local government district / municipality became the main object of study during 2010 -2014. The needed data are such as; financial balance data, regional revenue, the amount of local spending and social justice data on people's lives. Data analysis method used is Partial Least Square (PLS). The results provide the conclusion that the implementation of the fiscal decentralization policy gives positive and significant impact on local fiscal capacity. Fiscal capacity gives positive and significant impact on the local financial independence. Local financial independence gives positive and significant impact on the structure of the shopping area. The structure of local government spending has a significant effect on the achievement of social justice areas. In this case, the fiscal capacity and financial independence have no direct impact significantly on the achievement of social justice in the various districts / cities in East Java. In addition, this study also provides important conclusion that there is a significant indirect effect of fiscal decentralization on social justice through local fiscal capacity, local financial independence and the structure of local government spending.
<em>Since 2001</em><em> the</em><em> r</em><em>egional autonomy policies have </em><em>br</em><em>ou</em><em>g</em><em>ht</em><em> out</em><em> seven new provinces in Indonesia. Consequently, </em><em>they</em><em> require the central transfer budget to finance the delegated duties and authorities and the development programs in each province</em><em>.</em><em> Since its establishment until today, the fiscal capacity in seven provinces except Banten has not fulfilled the increase in local expenditure needs every year. It still much depends on the central transfer because the local revenue source like PAD is</em><em> very low</em><em>. This research uses a descriptive method-analysis by analyzing the secondary data relevant to the discussed topic and using the concept of fiscal capacity in the framework of the fiscal decentralization theory. The results of this qualitative research explain that the high fiscal capacity index (IKF) is obtained by </em><em>four </em><em>provinces those are Bangka Belitung, West Papua, Riau, and North Maluku, while the intermediate index is obtained by Banten, and the low fiscal capacity index is obtained by Gorontalo and West Sulawesi. Good fiscal capacity with high index does not guarantee that the poor population in the area will be reduced as West Papua and Riau which populations are still relatively large. Besides, Bantam with the very high PAD compared with six other provinces still has a large number of poor population of poor among seven provinces. But, overall the central transfer is recognized to be very helpful for the fiscal capacity of the seven new provinces above.</em><em></em>
The institutional collapse of a once unique state SFR Yugoslavia at the beginning of the 1990s, devastated economy, hyperinflation, corruption and general tendencies contrary to the processes in developed countries, in a nutshell - the entire macroeconomic environment being unstable, - brought about the need for political, economic, social and institutional reforms in the Republic of Serbia. The reform, among other things, and for the study of the factual issues it is exceptionally significant, covered the system of resource distribution and jurisdiction between the central and subcentral levels of government. Numerous changes which then occurred in the last twenty years or so, and which are still going on, have influenced political and territorial polity of our country to become decentralized, as well as the financial and fiscal relations between the levels of the Establishment. In the spirit of reform commitments, Republic of Serbia brought in a new Constitution and adopted copious amounts of laws, whose ultimate intention was promoting the fiscal system that would be in accordance with the latest theoretical findings and examples of good practice. In the structure of territorial organization of Republic of Serbia, autonomous provinces as entities of territorial autonomy, and municipalities, towns and the city of Belgrade have been established, as entities of local self-governance. Otherwise, subcentral authority levels in our country are facing many and various challenges when it comes to creating government revenue which, in its original or transferred form, remains available, used to finance their government expenditure, a constant need for their abundance and suitability, and all in order to constitute financial autonomy, followed by methods of governing the economic development, as well as the volume and content of jurisdiction. \nConsidering the fact that the distribution of resources amongst sub-central levels of government is preceded by the distribution of responsibilities, associated is the dilemma of which functions are realized more efficiently on a central and which on a subcentral level of government, and further, to what extent these lower levels are to be subservient to the central state, that is, in what sense independent. In that matter, it is essential to establish the extent of the realized fiscal decentralization, since depending on that degree, fiscal power is delegated to subcentral levels, the performance of public services is more efficient and is in accordance with priorities and preferences of citizens, which is also a precondition of successful functioning of all the segments of the public sector and widespread democratization of a society.
Purpose: Administrative decentralization seeks to redistribute authority, responsibility and financial resources to provide public services among different levels of the government. It is the transfer of responsibility for the planning, financing and management of certain public functions from the central government and its agencies to field units of government agencies, subordinate units or levels of government, semi-autonomous public authorities or corporations, or area-wide, regional or functional authorities. When governments devolve functions, they transfer authority for decision-making, finances, and management to quasi-autonomous units of local government with corporate status. According to Article 3 of the Constitution of Malaysia, Islam is the country's official religion; therefore, studying the legal system of this country, which has a Muslim background, is essentially important to our country. In addition, given the importance of decentralization in Iran, it is of considerable importance to study the challenges of the decentralization system, even when they are formed in a federal system. The Malaysian legal system, modeled based on the English law, has, after independence of the former country, chosen federalism, and, consequently, the political decentralization system for their government. However, the important issue refers to whether the system of political decentralization has been achieved completely and properly in this country and what are its damages? Decentralization can be a way of improving access to services, tailoring government actions to private needs, and increasing the opportunities for state-society interactions. Design/Methodology/Approach: This paper is formed and based on the critical paradigm with the descriptive method, and has been conducted in two sections. The first section of the study investigated the levels of government, and, in the second part, the relationship between federal, state and local governments will be discussed. Findings: Malaysia is one of the three Asian countries and the only southeastern Asian country which has chosen a federal government. The important matter is whether the mentioned federal system results in decentralization? The Malaysian government includes three layers: the federal government, the government of provinces and local government. The provincial and local governments, as the symbol of decentralization in such countries, are determined in Malaysia’s Constitution with their duties, discretions and limitations. Actually, however, the federal government interferes in provincial activities. 91 percent of financial resources are controlled by the federal government. The independent activities of local governments are hindered by factors such as limited responsibilities, federal and provincial governments’ interference in local government affairs, the role of the national association and housing ministry parallel to the local government regarding law and policy-making, existence of unique obligatory policies for all local governments, limited financial resources, and the appointment of local authorities by the federal government. Consequently, the above explanations imply that federalism, as a governmental system, will not necessarily result in decentralization. Originality/Value: Given the large number of studies on the issue of decentralization in the Iranian legal system, this paper, with the aim of observing the originality principle, intends to conduct a comparative study on the legal systems of Malaysia and the United Kingdom.
This paper examines the effects of fiscal decentralization on the education sector for a sample of 62 countries. The results suggest that different sources of fiscal decentralization have distinct effects on education expenditure and quality. While subnational governments that are financed through own-tax revenues are more likely to increase the funds allocated to education, they also seem less concerned with maintaining teaching quality. This study provides evidence that decentralized structures cater better to local social needs. Fiscal decentralization is, therefore, an important policy instrument for achieving social goals.
This article aims at presenting trends in the state-local budget-cooperation system in Denmark, following the local government reform in 2007 and the fiscal rules in the budget law from 2012. The article investigates some of the characteristics of the development from 1980 until 2016. Evidence gives support to the hypothesis that the possibility for the municipalities’ organization to negotiate increasing expenditures has been narrowed, however accompanied by more liberal grant financing. The local government reform seems to have opened a window of opportunity for an elaborated system of collective and especially individual central government sanctions to strengthen the macroeconomic management of service expenditures of local governments. The identified trends in the Danish state-local relations may indicate that the decentralized model of local governments in Denmark is increasingly under pressure. However, the Danish municipal sector is still growing with respect to economic significance.
Decentralized service delivery refers to the mode in which service delivery is done through delegation and devolution of power from center to local governments whereby efficiency and effectiveness are likely to be achieved. The purpose of this study was to assess the improvements in education and health services delivery in Yeka sub city of Addis Ababa city government. To realize the purpose of the study, case study research method was conducted. The study is qualitative whereby simple quantitative tools were employed so as to complement the qualitative narrations. The study primarily utilized secondary data obtained, from policy documents, constitution, proclamations, intervention plans and performance reports, etc. The study was supported with primary data obtained through interviews and questionnaires. The data results revealed that there is achievement in health and education service delivery as well as there are gaps in the services delivered. The findings of the study revealed that various functions of education and health services have been devolved to the lowest tier of government. The study has indicated that there are multiple bodies established at lower levels of government to support school and health centers activities. As a result, the services provided have expanded; there is now an increased availability and accessibility of the services in both education and health. The study also observed constraints; the constraints consider human resource, finance and facilities . Key Words concepts: service delivery, education & health, decentralization
The fiscal incentives literature emphasizes how the design of transfer systems has a significant implication on the behavior of local governments within decentralized systems. The empirical findings on the relationship between intergovernmental transfers and the incentives they create for local revenue generation are inconclusive and differ from country to country. Given the lack of data on local public finances, this type of study rarely involves developing countries. Using a unique and rich socio-economic and public finance data covering a large set of Moroccan municipalities over the period 2005 to 2009, this paper contributes to the new generation of fiscal federalism literature by assessing the fiscal incentive effects of two types of transfers: general purpose transfers (unconditional) defined by a formula and specific purpose transfers (conditional) allocated on an ad-hoc basis. After correcting for the endogeneity problem, our findings support the existence of a significant incentive effect of unconditional transfers and a less robust effect of conditional transfers. Suggesting that transfers from the central government complement local own revenues by encouraging Moroccan municipalities to collect more revenues.
Government leaders' attention to participatory governance, public-private partnership, and community empowering has been increased in developing countries as well as developed countries as a way of enhancing public trust in government and overcoming economic and social challenges in governance. Korea is no exception. Especially, the evolution of participatory budgeting (PB) in the Republic of Korea shows very interesting dynamics in the context of democratization and decentralization. PB in Korea is a mandatory citizen participation program in local governments since enacting the Local Finance Act in 2011. The case of PB program in Korea presents an important policy diffusion process from a bottom-up approach to a top-down one concerning intergovernmental relations for implementing a citizen participation program. As PB has been implemented in all the local governments in Korea, it provides a great opportunity to conduct a nation-wide assessment study of the PB adoption and diffusion, local government capacity for the PB implementation, and the impacts of the PB on public administration and values in local governance. Focusing on local governments' experiences of PB implementation, "Participatory Governance and Policy Diffusion in Local Governments in Korea: Implementation of Participatory Budgeting," provides theoretical and practical insights for understanding policy diffusion, implementation capacity, impacts, and challenges. It further elaborates several policy recommendations for enhancing PB implementation capacity given the ongoing challenges of PB implementation, including weak financial independency of local governments, the relation between local government and local council, and the low level of citizen participation in the PB program.
Maria Ambrosanio, Paolo Balduzzi, Massimo Bordignon
For almost two decades, starting from the early ‘90s, Italy experienced the strongest wave of decentralization reforms in its post II World War history. The causes were both economic and political. Yet, in recent years, again economic and political causes seem to call for opposite reforms. Along with a second wave of scandals, this time interesting local politicians, the crisis that has hit our country since 2008 is having relevant effects on the relationships between central and local governments. The aim of this paper is to assess dimension and direction of these effects. We first review the situation of "fiscal federalism" in Italy before the crisis, summarizing the decentralization process in the ‘90s, its consequences in terms of financing and functions for local governments, the constitutional reform of 2001 and the implementation problems this created. We then look at the numbers of the crisis; the "double dip" of the economic cycle in the period 2007- 2013, the policies implemented to contrast the financial market confidence crisis and the distribution of the burden of the fiscal consolidation across levels of government. We also discuss the institutional features of the implemented policies, in particular referring to number of local governments and to the financial relationships between level of governments, including taxes, transfers, fiscal rules and bankruptcy procedurals. Finally, we look at the future: what consequences will the new European rules, as enshrined in the new art. 81, have on the financial relationships between levels of government? And how is the balance of power between the center and the periphery going to change in lieu of the new proposed Constitutional reform?
Central governments canalize to decentralized organization for compensate public demands faster, high quality and efficiency in globalization process. Local governments take effectively charge in distribution of income, education, health, housing on local basis which are parts of public policy and increasing the welfare level of the citizens of their municipality with their own facilities. The most important mission is incumbent to municipalities which is local governments’ type, in decentralized organization. Municipalities have two types incoming source; one of them from central governments sources the other one is internal revenue. This study aims to give information about municipalities which are at the forefront among local governments and property tax which is one of income sources municipalities. In this sense, law no. 5393 which was accepted on the 3rd of July, 2007 was studied in the frame of property tax and information about the phases of municipalities from the foundation up to now and their financial structure was given. Keywords: property tax, local government, decentralization, budget.
Over the period 2007–2013, a series of undertakings were made to introduce fundamental elements of decentralized education finance to Egypt. In 2009, 8.4M Egyptian pounds (EGP) of the Government of Egypt’s (GOE) budget was decentralized to every primary school in three pilot governorates. By 2013, EGP 1.2B of the GOE’s money had been decentralized nationwide. This paper describes what these undertakings strived to achieve, what specifically was done to achieve these objectives, the degree to which these objectives were achieved, the reasons why they were achieved to the degree they were with particular attention paid to the institutional and political context within which these undertakings unfolded. The account of the technical work that was undertaken to decentralize these funds is important, but more important is the account of the interplay between the technical work, the fact that this work supported a GOE-led initiative, and the volatile political environment—pre-revolution, revolution, and post-revolution Egypt—in which the work was done for it is here where important lessons about reform emerge.
Giving local government to arrange regional receipt to purchase expenses bugget is part of Regional Otonomy. Not only depend on Central Government, Government genuine Receipt is one regional receipt that shows how stronger local goverment finance can handled all the expenditure. Metro as a local government in Indonesia, has the increase in regional otonomy espescialy in finance. The higher decentralization is a indicatoin that indicate higher ability on local government to fulfill all expenditure. It can be shown on share of Government Genuine Receipt and Tax and non Tax Share compare Total Regional Receipt and Total Regional Expenditure. Higher fiscal Desentralization needed by Metro to get higher Regional otonomy. Government Genuine Receipt and Tax and non Tax must be increased to get higher regional receipt and increasing share in Total Regional Receipt and higher share to offord the Total Regional Expenditure.
Fiscal decentralization and intergovernmental fiscal relations reform have become nearly ubiquitous in developing countries. Performance, however, has often been disappointing in terms of both policy formulation and outcomes. The dynamics underlying these results have been poorly researched. Available literature focuses heavily on policy and institutional design concerns framed by public finance, fiscal federalism, and public management principles. The literature tends to explain unsatisfactory outcomes largely as a result of some combination of flawed design and management of intergovernmental fiscal systems, insufficient capacity, and lack of political will. These factors are important, but there is room to broaden the analysis in at least two potentially valuable ways. First, much can be learned by more robustly examining how national and local political and bureaucratic forces shape the policy space, providing opportunities for and placing constraints on effective and sustainable reform. Second, the analysis would benefit from moving beyond design to considering how to implement reform more strategically.
Análise da capacidade de autofinanciamento e da dependência financeira dos municípios fluminenses para custear o gasto municipal no Sistema Único de Saúde (SUS). Estudo descritivo, seccional e analítico com dados do Sistema de Informações sobre Orçamentos Públicos em Saúde (Siops). A receita per capita própria municipal foi utilizada como medida da capacidade de autofinanciamento. O Índice de Capacidade de Autofinanciamento (ICA) permitiu o ordenamento dos municípios por graus de capacidade de autofinanciamento. As medidas estatísticas utilizadas foram a média, desvio padrão, intervalo de confiança e o coeficiente de correlação de Pearson. Os valores de receita e gasto em saúde foram deflacionados pelo Índice Geral de Preços (IGP-DI). Os resultados evidenciaram que houve aumento da capacidade de autofinanciamento entre os anos de 2002 e 2013, com decréscimo a partir de 2014. Na distribuição por graus de capacidade de autofinanciamento identificou-se entre os aos 2002 e 2008 uma continua ascensão dos municípios para graus mais elevados e, a partir do ano de 2009 em diante, todos se encontraram no grau 4, demonstrando maior aproximação das receitas municipais. Por outro lado, verificou-se permanência de desigualdades de receita própria para gasto em saúde. Houve elevação da despesa total em saúde durante todo o período com participação dos dois subcomponentes de receita (receita própria e de transferências SUS) neste crescimento. O gasto próprio deteve a maior participação na despesa total em que pese a relevância das transferências SUS, em especial da União, onde 80 por cento dos municípios apresentaram uma dependência de recursos de transferências do SUS acima de 20 por cento na execução de sua despesa total em saúde
In this paper we present the main features of the current system of financing of local self-governments (LSG) in Serbia and propose the principles and directions for its further improvements, given the current level of decentralization. For this purpose, we analyzed the current legal framework in the area of LSG jurisdiction on the one hand, and model of financing of LSGs, on the other. In addition to that, we tried to depict a financial position of LSGs and local public utility companies (LPUCs) using financial data for the period from 2011 to 2013, in order to design principles for systematic regulation of this area, the latter being of particular importance in the dominant context of fiscal consolidation policy. The general conclusions and recommendations point to the necessity to design such a concept of financing of LSGs which has a firm link between jurisdiction, i.e. type of public services provided by LSG level, and sources for financing of these jurisdictions/services - aligned in terms of quality and availability of these services with the objective possibilities. Analysis of the financial data indicates that there is relatively firm evidence in support of the conclusion that the main source of bad financial position of certain LSGs reflected in a high level of outstanding stock of payables to suppliers, lies in the inappropriate financing of public utilities and local institutions founded by LSGs.
Fiscal decentralization has been established in the People’s Republic of China (PRC), but crises emerge at the local government level due to remaining problems of the fiscal administration system of tax allocation and the impact of replacing the business tax with a value added tax. The PRC taxation system requires readjustment and local governments have begun to focus on innovative financing models. The main path to stable and sustainable government finances is to maintain the general public budget and the government fund budget. The present chapter shows that use of innovative fundraising and financing channels will lead to the upgrading of local government infrastructure and public services. Suggestions for enhancing local government fiscal stability and sustainability include: reducing the fiscal burden at the local level by standardizing and legalizing outlay establishing a modern taxation system; establishing a standardized and predictable transfer payment system by introducing block transfer payments and prioritized transfer payments as a basis for a stable growth mechanism for general transfer payments; promoting public–private partnership legislation to encourage participation of social capital and maximize the multiplier effect of public expenditure; and improving the mid-term budget and debt-annexed budget and establishing a government planning mechanism for investment and debt financing of major infrastructure construction projects.