Abstract The article analyzes the specifics of the COVID-19 crisis and its impact on the public finance system, taking into account the key problems of the theory of fiscal federalism. The purpose of this article is to examine the impact of the pandemic crisis on the fiscal relations taking place between different levels of public authority ( intergovernmental relations – IGR ), considered in the context of the decentralization of the public finance system and the associated distribution of public functions and resources. The article refers to the model features of these relationships, as defined in the theory of fiscal federalism. It also examined the responses of European countries to the negative effects of the COVID-19 crisis, taken within the framework of the IGR, in order to limit the negative effects of the pandemic at different stages. An attempt was also made to answer the question of how the current pandemic crisis may change the multilevel governance (MLG) patterns set forth in the doctrine. The Polish public finance system was used as an example for detailed analysis in this regard.
The purpose of this study is to test and analyze the influence of fiscal decentralization on development performance in Indonesia using the structural equation model approach. The data uses panel data, from 34 provinces and in 2015-2019 sourced from the Ministry of Finance of the Republic of Indonesia and the Central Bureau of Statistics (BPS). Data analysis using structural equation model approach with the help of Smart-PLS 3.3.3 software. The outer model evaluation results concluded that all indicators of fiscal decentralization variables and economic development performance variables are valid. The most powerful indicator reflecting the latent variable of fiscal decentralization is the ratio of regional income and economic development performance is an indicator of economic growth. The results of the evaluation of the inner model found that fiscal decentralization performance has a positive and significant influence on development performance. The existence of fiscal inequality among provinces in Indonesia causes uneven ratios of capital expenditures and public incomes as seen from the low indicator in reflecting decentralization of fiscal and economic performance
The fiscal dimension of decentralization covers the assignment of public spending responsibilities to subnational governments (SNGs), and how these are financed through local taxes, transfers, and borrowing. Revenues from local tax powers are inadequate and the scope for borrowing is limited for most SNGs outside wealthy urban areas. Consequently, the main source of financing for the local spending responsibilities of most SNGs is, and will remain, fiscal transfers (i.e., revenue-sharing and unconditional and conditional grant mechanisms). These show a wide variety of types and features around Asia. The challenge is to design such mechanisms in ways that promote equity in public spending across the national territory, and impart the right degree of local flexibility and the right incentives for SNGs.
In the practice of decentralization, the Revenue Sharing Fund for Tobacco Excise (DBHCHT) is given to tobacco-producing regions from the State Budget (APBN) in return for their contribution to state revenue. The management of the Tobacco Excise Revenue Sharing Fund is allocated to fund five programs, namely improving the quality of raw materials, coaching industry, social environment development, socialization of provisions in the excise sector, and eradication of illegal excisable goods with priority in the health sector to support the national health insurance program, especially increasing the quantity and quality of health services and economic recovery in the regions. In addition to the health sector, The Minister of Finance Regulation also allocates Revenue Sharing Fund for Tobacco Excise (DBHCHT) in the areas of community welfare and law enforcement.
Financing regional government involves trade-offs between own-source taxes and grants. Improved accountability has been an argument behind calls for greater tax devolution, but this argument relies upon effective scrutiny mechanisms existing or being developed. This paper explores such issues through the lens of recent tax devolution to Scotland. Drawing on insights from senior stakeholders, we assess how scrutiny has changed in the aftermath of new powers. We conclude that, despite some improvements, progress has been limited. We develop an analytical framework to understand why, drawing out lessons for improving accountability with fiscal decentralization.
Intergovernmental fiscal and finance relations have a deep impact on characteristics of China's economy and the behavior of local government at all levels. This paper wants to figure out the basic logic for the allocation of financial resources among regions under the implicit financial decentralization. Based on local government financing vehicles' (LGFV) debt data and by exploiting “Province Managing County” (PMC) reform as a policy shock to construct a DID framework, this study find that city governments with better economic and fiscal status can gain more funds through bank loans and municipal bonds when facing PMC reform, whereas the less developed ones are less capable to utilize the new opportunity, thus widening the regional gap of local government financing. Mechanism analysis implicates that city's economic and fiscal status are the deciding force of the above procedure. However, the catching-up pressures and developing incentives of less developed regions can't be realized in reality. This study argue that this might be an explanation for the expansion of regional disparity along with the reform of China's central-local relationship.
Ndamsa Dickson Thomas, Mbiydzenyuy Courage Sevidzem, Tangwa M. Wiykiynyuy
Much literature exists on fiscal decentralization and intergovernmental fiscal relations in sub-Saharan Africa, and some of the very salient policy actions that have impacted local government development have emerged from such literature. The developing world, including sub-Saharan Africa (SSA), has markedly promoted fiscal decentralization in the last three decades. However, many important aspects of fiscal decentralization in SSA and Cameroon, in particular, have not been addressed by existing literature. The main objective of this review paper is, therefore, to identify the literature gaps and design an agenda for future research in the areas of fiscal decentralization and intergovernmental fiscal relations that has the potential to impact policy and spur development in Cameroon. A qualitative research methodology (content analysis) is used to gather, group, and offer a critical look at existing literature on the benefits of fiscal decentralization and intergovernmental fiscal relations in sub-Saharan Africa. It uses an integrative review and a standardized approach of abstracting appropriate information from each article and performing an appropriate analysis of the literature survey of a few decentralized countries in SSA as the population focused on in the primary studies. This review paper recommends that areas for further research on FD in Cameroon should include: Types of funding autonomy desired by local government councils in Cameroon; Revenue sharing formulas that are good for Cameroon’s economic development; How central government transfers enhance local revenue mobilization in councils which share the same political affiliation as the ruling party compared to those who do not. Studies that point to new ways of generating supplementary financing at the local level in Cameroon to match the increased responsibilities due to decentralization are still rare. The percentage of shares of central government revenue transfers to local communities is necessary to reduce poverty and inequality, and what agency and criteria should be put in place to control the execution of these transfers? The above recommendations of this review paper will greatly inform theory, policy, and practice on fiscal decentralization realities in SSA as a whole and Cameroon in particular.
This study aims to analyze the effect of the Village Fund on poverty alleviation and improvement of basic infrastructure services for drinking water and sanitation in districts and cities in Indonesia. The need for evaluation of the Village Fund policy is a consequence of the implementation of fiscal decentralization to villages based on Law no. 6/2014. This policy has implications for an increase in transfer funds to villages of more than IDR 329 trillion cumulatively. Theoretically, fiscal decentralization to villages should improve public services and accelerate poverty reduction through local preferences matching and more efficient allocations. This research was a quantitative study using path analysis to test the hypotheses. Data were obtained from BPS and the Ministry of Finance for all districts/cities receiving Village Fund. The results show that The Village Fund had a significant effect on poverty reduc-tion nationally, although its contribution was very small, and the effect was not significant in districts/cities with low fiscal capacity. The Village Funds had an effect on increasing drinking water but not significant, on the other hand, it had a significant effect on districts/cities with medium or low fiscal capacity with low poverty rate. The Village Fund had an effect on improving sanitation but it was not significant nationally or in all districts/cities. The Village Fund for drinking water had no significant effect on poverty reduction nationally and for all districts/cities. The Village Fund for sanitation had no effect on poverty reduction nationally or in all districts/cities but it had an effect on districts/cities with low fiscal capacity and poverty rate even though it was not significant. The implementation of the Village Fund policy needs to consider the fiscal capacity and diversity of regional characteristics in order to make the effectiveness of the Village Fund more optimal.
<strong>Abstract:</strong> Local authority autonomy is critical for effective and efficient delivery of services to the people. One of the objectives of this study was to design a framework that seeks to address the challenges associated with attainment of local authority autonomy. The purpose of the framework was to support local authorities so that they participate in the implementation of development as per the needs of the people at the local level in Zambia. The study develops a framework for achieving decentralisation as an initiative for supporting public participation and local authority autonomy. The study establishes that local authorities in Zambia primarily financed through a system of intergovernmental transfers or grants, do not have adequate revenue base to guarantee fiscal autonomy and, are bogged down by limitless political interferences and regulations. In order to guarantee autonomy of local government, the study develops a framework through a pragmatic approach. Data is collected using purposive and critical case sampling, through person-to-person interviews, questionnaire interviews as well as secondary data through literature reviews and content analysis of local authority project documents. The sample size for the questionnaire was 103 computed at ninety-five percent confidence level with a five percent confidence interval. The framework was validated by 17 experts in the local government sector; that were involved in the implementation of both grant and locally financed projects. The study argues that the proposed framework could enhance decentralization and improve local authority autonomy in Zambia and the paper suggests that local government should intensify on internal revenue generation. <strong>Keywords:</strong> local government finance, local government framework, central government grants, fiscal autonomy, decentralization. <strong>Title:</strong> Achieving Fiscal Sustainability in Zambia’s Local Government: Designing a Local Government Framework <strong>Author:</strong> Moffat Tembo, Dr. Erastus Misheng’u Mwanaumo <strong>International Journal of Recent Research in Interdisciplinary Sciences (IJRRIS)</strong> <strong>ISSN 2350-1049</strong> <strong>Vol. 9, Issue 3, July 2022 - September 2022</strong> <strong>Page No: 33-46</strong> <strong>Paper Publications</strong> <strong>Website: www.paperpublications.org</strong> <strong>Published Date: 02-August-2022</strong> <strong>DOI: </strong><strong>https://doi.org/10.5281/zenodo.6952792</strong> <strong>Paper Download Link (Source)</strong> <strong>https://www.paperpublications.org/upload/book/Achieving%20Fiscal%20Sustainability-02082022-4.pdf</strong>
One form of the implementation of regional autonomy is the existence of autonomy in the aspect of regional financial management which is called fiscal autonomy. Fiscal autonomy is the delegation of responsibilities and the distribution of power and authority for decision-making in the fiscal sector, which includes both revenue and expenditure aspects. Fiscal decentralization is linked to the duties and functions of local goverment in providing public goods and services. This study aims to analyze the degree of fiscal decentralization in Southeast Sulawesi Province in 2016-2020.The degree of fiscal decentralization is a measure of the ability of local goverment in order to increase Local Own Revenue which is used to finance development in Southeast Sulawesi Province. This is study uses secondary data. The analytical tool used in this study is quantitative analysis, namely the analysis of the degree of fiscal decentralization, namely the ratio between Regional Original Income and Total Revenue Regional. The results showed that the degree of fiscal decentralization of Southeast Sulawesi Province in 2016-2020 fluctuated with an average 0f 25,25% so it could be said that it was still in the moderate category.
This paper investigates the spatial diffusion of an intergovernmental grant in Benin. Using static and dynamic spatial models, we estimate the spillover effects of the Fonds d’Appui au Développement des Communes (FADeC) on per capita local government expenditure in the 77 municipalities from 2008 to 2015. Neighborliness – a measure of interdependence – is captured through geographic and distance-based spatial weighting schemes. In addition, we constructed a measurement of ethnic affinity as an alternative spatial weighting scheme to test for the existence of an ethno-spatial interdependence in local public finance in Benin. The empirical results suggest that a statistically significant share of the total effects of the FADeC stems from indirect elasticities or the diffusion process of grants received by neighboring jurisdictions, regardless of how we measure neighborliness. The results also confirm the existence of a robust ethno-spatial interdependence and complementarity in local government expenditure in Benin. The spillovers across ethnic neighbors are estimated to be 13.9% of the total effects in the short-run and 15.5% in the long-run. Put differently, the effects of the FADeC in a given municipality are influenced by the transfers received by its ethnic (and linguistic) neighbors. The findings point to the appeal of inter-governmental transfers for the decentralized financing of public services, especially in low-income countries where local bureaucratic capacity in raising own-source revenues might be limited. Supporting local governments with well-structured grants can not only be a channel to foster local public provision but also contribute to pushing geographic or ethnic neighboring localities to increase their own spending and generate positive spillovers that are crucial for wholistic regional development.
Existing literature has examined a plethora of factors that can affect the effectiveness, performance or nature of fiscal policy in an economy. In this paper we build on the fundamental tenets of micro-economic models to examine the potential ways cryptocurrencies can affect the effectiveness of a country’s fiscal policy. Our finding is that under the assumptions of an absence of uncertainties, perfectly competitive markets, household utility maximization, and usage of public money and cryptocurrency, the government purchases as well as the ability of the government to raise funds by issuing bonds and by taxation is decreasing in new investments in cryptocurrencies but increasing in the income earned from cryptocurrencies. We go further to discuss the factors that account for the sustained ability of cryptocurrencies to weaken the state’s fiscal-policy capabilities and possible ways the effects of cryptocurrencies on the state’s fiscal integrity can be mitigated.
Over the last few decades, the financing of cities has been at the heart of ongoing debates of change and deep reforms as well as major concerns in all countries where decentralization is giving an increasingly dynamic role to local governments. This article presents the role of local taxation in promoting sustainable urban development in Morocco through an empirical study of 163 actors and partners involved in cities in the regions of Casablanca-Settat and Rabat-Salé-Kénitra. The results show that to increase local taxation in Morocco, it is necessary to develop the capacity of city managers, encourage public-private partnerships, and improve the quality of spending.
Fiscal decentralization gives local governments the authority to use revenues to finance local expenditure, one of which is expenditures intended to improve the quality of human development. This study aims to analyze the effect of Local Own Source Revenue (PAD), Special Allocation Funds (DAK), and Surplus of Budget Financing (SiLPA) on the Human Development Index (IPM) through capital expenditure on districts/cities in North Sumatra. This study uses panel data consisting of time series data for 2015-2019 and cross section data for 33 districts/cities in North Sumatra. Hypothesis testing is done by multiple linear regression and path analysis. The results of the study proved that DAK and SiLPA have a positive impact on capital expenditures, while PAD has no impact on capital expenditures. Meanwhile, PAD and DAK directly have a significant positive effect on HDI, while SiLPA has no effect on HDI. In addition, PAD, DAK, and SiLPA indirectly have no significant effect on HDI through capital expenditure.
Based on the scholar’s research on the influencing factors of local government debt, this paper argues that the local government financial resources, degree of decentralization and local government investment enthusiasm in local finance are the significant factors that influence the form of local government debt. This paper also chooses the panel data of China’s 31 provinces (cities) except Hong Kong, Macao and Taiwan from 2010 to 2019, to analyze the influencing factors of local government debt scale and the relationship of local government debt scale in different regions and demonstrates the correctness of the hypothesis proposed in this paper. The analyze result shows that the local government financial resources significantly inhibit the growth of local government debt. The degree of local decentralization is an essential factor to enlarge the scale of local government debt. There is a significant positive correlation between the enthusiasm of local government investment and the scale of local government debt.
This dissertation consists of two independent essays on public economics. The first essay studies the consequences of fiscal decentralization on poverty and income inequalities. This essay describes the possible channels through which fiscal decentralization might affect poverty and income inequalities, and carries out an empirical analysis with data of a large number of countries at different stages of development, for the period 1971-2000. Fiscal decentralization is found to have significant effects on poverty and income inequalities. These findings are important because they suggest, contrary to the traditional public finance theory, that sub-national governments can play an important role in the reduction of poverty and income inequalities. The second essay studies the second best solution to the public expenditures’ problem in the presence of a proportional labor income tax. By allowing the tax base to vary with the taxpayers’ behavioral responses to taxation, we derive the “effective” budget constraint faced by the government, which describes the set of affordable combinations of public and private goods. We show that the optimal solution to the government problem corresponds to the point of tangency between the effective budget constraint and the highest attainable social indifference curve. The traditional normative prescription for public expenditures under a second-best scenario does not satisfy this condition, and therefore it provides a suboptimal solution. Finally, we use the same analytical framework in order to explain the flypaper effect, an empirical regularity that has for long challenged the conventional theory.
Decentralization is a key governance reform which many developing countries have embarked on. Local governments are expected to use their informational advantage to improve the delivery of public goods. This result implied by Tiebout’s (1956) model requires fully informed citizens who “vote with their feet.” The model’s application to developing countries has been limited, since local decisions may not be responsive to local demands. Practitioners are shifting to innovations that minimize institutional constraints so that decentralized programs can lead to improved outcomes. Examples of such innovative ways include decentralized agricultural extension programs, which embrace farmers’ empowerment, local government, and private sector participation. Few impact evaluation studies on agricultural extension have combined qualitative and quantitative methods. This dissertation contributes to the literature by applying these methods and survey data to study the impact of a decentralized extension program in Uganda, known as the National Agricultural Advisory Services (NAADS) on the value of farm production per acre. The program is non-randomly assigned to local governments and farmers self-select in or out within participating sub-counties. Using a sample of 305 participating and non-participating farmers and local government assessment indicators as instruments, we cannot reject the null that the NAADS program has had an impact. The 2SLS results show no program impact; however, the OLS results show that the program had a positive impact on the value of farm production per acre of about 20 percent. Qualitative results show that NAADS farmers: participate in local decision making processes through farmers’ institutions; have increased knowledge on farming; and practice enterprise diversification. The quantitative finding must be treated with caution; for example, the study did not account for spillover effects. The NAADS program faces challenges inherent in Uganda’s decentralized structure; particularly the low financial and human capacity, and the weak monitoring at the local level. The policy implications include: the need to strengthen farmers’ institutions; development of a marketing strategy; clear policy guidelines for local government support to NAADS; improved coordination of NAADS activities among line ministries; need for additional resources for NAADS activities; and improved capacity of service providers.
Environmental protection is a basic public service that the government must guarantee and is closely related to public health. An important driver of environmental pollution in China is the local government’s pursuit of a rapid economic development while ignoring environmental protection under the Chinese-style fiscal decentralization system. On the basis of the principal–agent theory between the central and local governments, this study analyzes the environmental deterioration caused by the distortion of local government behavior under fiscal decentralization. In addition, using China’s prefecture-level city data from 2014 to 2018, this study empirically estimates the impact of fiscal decentralization on environmental pollution. SO 2 emissions and PM 2.5 concentrations are used to measure the degree of environmental pollution. Results show that Chinese-style fiscal decentralization exacerbates environmental pollution and that the impact of fiscal decentralization on environmental pollution differs in regions with varying levels of economic development and cultural penetration. Moreover, fiscal decentralization does not significantly impact environmental pollution in eastern China and in those areas influenced by Confucian culture yet aggravates the environmental pollution in central and western China and in those areas that are not affected by Confucian culture. These results offer important policy implications. Clearly dividing the power and financial power between the central and local governments, establishing an environmental governance system compatible with economic incentives, and building an environmental public finance system can alleviate the impact of Chinese-style fiscal decentralization on environmental pollution.
The subject of this article is the set of economic and financial relations that develop in the process of inter-budgetary regulation and equalization of budgetary provision and balance of heavily subsidized budgets at the subnational level. The purpose of the study is to identify the degree of influence and effectiveness of the existing system of inter-budgetary regulation and fiscal decentralization in Russia in relation to heavily subsidized budgets at the subnational level in the context of their socio-economic, budgetary and financial condition and development. The methodological basis of the study is based on the Russian budgetary legislation, as well as domestic and foreign scientific studies devoted to the theory of fiscal decentralization (federalism), mechanisms for equalizing budgetary provision at the subnational level, approaches to assessing the degree of influence of fiscal decentralization on stimulating economic growth in regions and states. In the course of the study, the author applies a systematic approach, as well as general scientific and special methods: coefficient method, comparative, structural dynamic retrospective analysis. The analysis of the relationship and dispersion of the financial parameters of subnational budgets using the Pearson pair correlation coefficient, as well as the coefficients of variation and oscillation. The study reveals the problematic aspects of the effectiveness of the existing system of inter-budgetary regulation and the convergence of the socio-economic state of heavily subsidized regions in recent years. This result contradicts most budgetary practices and the theory of fiscal decentralization, which justifies the need for a qualitative change in the existing system of inter-budgetary regulation. The main conclusion of the study is that the existing mechanism of inter-budgetary regulation and the existing instruments for equalizing budgetary provision do not contribute to a significant change in the fiscal and socio-economic parameters of the development of heavily subsidized budgets at the subnational level. The nature of the use of the gratuitous aid received for this category of subjects of the country is reduced to short-term coverage of the gap in financing expenditure obligations but does not change the model of either the organization of budget regulation or the regional economy. Soft budget constraints create weak incentives and lead to financial and economic problems — increased dependency and subsidies.
The main purpose of this paper is to set a model in which there exist multiple firms producing data in a situation where each firm produces data and shares it voluntarily for new additional revenue. The model is used for theoretical examination of the revenue distribution rule and behaviors to maximize the social welfare. Consequently, the following three main results can be obtained. First, if the number of firms is sufficiently large and some conditions are assumed, the revenue distribution rule to maximize social welfare in a decentralized economy coincides with the elasticity of additional revenue with respect to the provided data. Second, if each firm maximizes profit in the decentralized economy, the firm can achieve allocations to maximize social welfare in a command optimum for any revenue distribution rule as long as the government provides the policy of lump-sum tax and subsidy appropriately. Third, if the subsidy for data sharing is financed by a flat rate tax for additional profit, each firm has an incentive to participate in the platform irrespective of the subsidy rate and revenue distribution rule.
Considered structural sectoral reforms taking place in Ukraine in the process of decentralization are aimed at forming viable territorial communities that are able to solve social problems to meet the needs of residents of administrative-territorial units, taking into account socio-economic, environmental, geographical, cultural, historical and other factors of their development. At the same time, the issues of obtaining financial results from the introduction of tax and budget decentralization, budget financing of expenditures guaranteed by the state remain relevant. Assessment of indicators in these areas will allow to determine the level of financial potential and risks for the functioning and development of spheres of life of local governments. The outlined indicators of assessing the financial capacity of local budgets are based on the analysis of budget indicators of territorial communities and aim to identify problematic issues that hinder the socio-economic development of administrative territories and the inability of local authorities to perform their own and delegated powers. Among the factors influencing the indicators of indicators of local government solvency assessment, the system of horizontal budget equalization and the methodology for determining the local budget tax capacity index need to be improved. Standardization of indicators for assessing the financial capacity of local communities will increase the effectiveness of existing methodologies for measuring them. The updated mechanism for assessing the financial autonomy and independence of local budgets is based on a deeper analysis of financial indicators of local budgets, which requires further study.
Introduction. For solving problems connected with slowing down of economic growth and declining of social welfare level, it is advisable to develop and implement state measures based on the concept of inclusive sustainable growth and forsee building an effective system of public financial management. This stipulates the necessity of improvement of budget policy, the principles of functioning of state and local budgets, inter-budgetary relations and requires detailed monitoring of the consequences of the transformation of the budget system as a result of administrative and territorial reforms and decentralization reforms.Methods. Such general and special methods as analysis and synthesis, comparison, generalization, associations, analogies and others have been used in the study. The purpose is to assess the impact of transformation processes on the functioning of state and local budgets, identifying problems and outlining prospects for improving the budget system in the context of continuation of reformation of the public financial management system.Conclusions. As a result of assessing the consequences of administrative and territorial reform and decentralization reform on functioning of the budget system, it has been found that most reform measures are aimed at improving the quality and accessibility of public services. Given the feasibility of raising the efficiency of the public financial management system, the need in the following has been proved: to develop a budget policy strategy that would take into account the key objectives of inclusive sustainable development; introduction of strategic and medium-term budget planning; improvement of program and target budgeting; increasing the financial capacity of territorial communities; development of gender-oriented and participatory budgeting; increasing the level of transparency of public finance management.Discussion lie in finding the ways of improving the functioning of the budget system in the context of continuation of reformation of the public financial management system.
Intergovernmental fiscal transfer is a pillar of fiscal decentralization initiatives in developing and transition economies. These transfers serve several functions that include: correcting the vertical and the horizontal fiscal balances, compensating or offsetting for the spill-overs or externalities between different jurisdictions, funding national priorities and administrative priorities and capacities of the national. However, SNGs in developing countries particularly in Sub-saharan Africa is struggling with fiscal decentralization initiatives due to the lowered potential of local revenue generation. Due to these gaps in studies on Intergovernmental Fiscal Transfers (IGFT) in devolved government structures, the study evaluated how IGFT is organized and structured in Kenya. The study adopted a descriptive design and undertook a review of publicly available data which was supported by interviews of selected directors from the budget, finance and planning departments in three county governments of Baringo, Kiambu and Vihiga. The study established that intergovernmental fiscal transfers make up 87 per cent of SNG revenues, equalization fund is about 2 per cent while own source revenues make up 10 per cent. Other revenue sources are conditional transfers in form of ad hoc and cost-reimbursement approaches from both the national government and development partners. Regarding intergovernmental fiscal transfers, the national government should disburse funds in a timely and efficient manner to enable county governments to fulfil their mandates. The study makes the following conclusions; there is an overreliance on intergovernmental fiscal transfers by SNGs and this might constrain their capacity to provide services and impede devolution initiatives; the formula-based unconditional grant in Kenya offers great prospects for devolution and the rise in unconditional transfers portends well for SNGs. The study recommends that SNGs speed up the legal mechanism for identifying and classifying and assigning local revenues, the national government should consider introducing or substituting fiscal transfers with the tax-sharing arrangement to incentivize revenue diversification among SNGs and lastly, SNGs should consider pooling of resources to incorporate special purpose vehicles for sub-national government borrowing. The study contributes to the existing knowledge by delving more into the elements of fiscal decentralization and in particular intergovernmental fiscal transfers. Recommendations for further studies include studies on how other elements of decentralization impact the performance of the counties, how decentralization is improving governance at the local level and how the East African Community may affect governance and service delivery at the sub-national levels.
Fiscal decentralization is widely recognized to bring leaders and decisions makers closer to the citizens resulting in better delivery of public services. Underperformance in the revenue collection has a significant effect on the ability of the sub-national governments (SNGs) to deliver services to its citizens. Due to these challenges, this study sought to examine the state of the local revenue decisions among sub-national(county) governments with a focus on Kiambu, Vihiga and Baringo Counties in Kenya. The study was descriptive in nature and used interviews with purposefully directors from budget, finance and planning departments and secondary data collected from Commission on Revenue Allocation (CRA) and Kenya National Bureau of Statistics (KNBS). Data obtained was analyzed thematically and descriptively. The analysis shows that the revenue collection by the SNGs in Kenya have increased marginally since the establishment of the devolved structures but have stagnated when they are adjusted for inflation. The revenue collection figures of the SNGs are underperforming and are drawn from a relatively small base. User charges, business licenses and property tax are the main revenue bases contributing about 86 per cent with user fees contributing more than half of the revenues. The effective own source revenue (OSR) to budget funding indicates that six counties can fulfil the requirements for devolution of at least 10 per cent effective OSR to budget. This scenario impeded the attainment of the objectives of devolution and increases dependence on fiscal transfers. The study recommends the following; the county governments should give realizable estimates of local revenues, improve on the management and control of the current revenue bases and lastly integrate new revenue bases. The study contributes to the existing knowledge by delving more into the elements of revenue decentralization and recommends further studies on how other elements of revenue decentralization impact the performance of the subnational governments in sub-Saharan Africa