French sub-national public finances: on the difficulty of being a decentralized unitary state

Garello, Pierre

doi:10.4337/9781784715113.00012

Cited by 3 publications

(4 citation statements)

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“…Our findings indicate that the Central Government's intervention restricted the financial autonomy of LGs in Italy by shrinking the credit market. The situation is similar in France [39], another unitary EU country; despite the decentralization process undertaken in the country, the Central Government is still strongly involved in LGs' financial affairs. While the possibility to borrow from the market has been conceded to LGs with the General Code for Territorial Communities, when their operating budget and the investment budget are balanced, in 2010 the Central Government revoked an important a sub-national tax (the tax professionelle) to keep the consolidated budget balanced.…”

Section: Discussionmentioning

confidence: 97%

“…For example, the shift to the Market Discipline and Control Model in unitary states would not ensure that the costs for LGs would be less than the costs they are paying under the Centralised Discipline and Control Model. This depends on the maturity of financial markets, which is not the case for European unitary countries [14,39], and would require the adoption of accountability mechanisms such as those adopted by LGs in the United States and Switzerland, where voters decide about the sustainability of debt through referendum [8].…”

Section: Discussionmentioning

confidence: 99%

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Are Central Government Rules Okay? Assessing the Hidden Costs of Centralised Discipline for Municipal Borrowing

Eltrudis

Monfardini

2020

Sustainability

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In the EU, the specialty municipal banks have been the traditional funding source besides tax sharing and governmental transfers for Local Governments (LGs). With the decentralization process, LGs experienced different market-based options so that banks were no longer the only source of funding. However, with the onset of the Eurozone crisis, public sector debt is no more risk-free, and the cost of borrowing became unstable over time. To minimise such risks, Central Governments forced LGs to adopt general principles of control of local borrowing. Previous studies evidenced that centralised controls affect unitary countries more than federations. This paper investigates the Centralised Discipline and Control Model to understand whether it generates hidden costs. For such a purpose, the paper compares municipal bonds against borrowing from banks in Italy, a European unitary country. This paper highlights the existence of hidden costs for Italian LGs because the Central Government set up an expensive system for controlling the entire public sector debt. Policy makers should pay particular attention to which model of control to adopt by considering their country’s specific characteristics and the potential impacts of the different models on them, according to the present economic circumstances.

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Section: Discussionmentioning

confidence: 97%

Section: Discussionmentioning

confidence: 99%

Are Central Government Rules Okay? Assessing the Hidden Costs of Centralised Discipline for Municipal Borrowing

Eltrudis

Monfardini

2020

Sustainability

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“…In France however, own-source revenue comprises 60.6% in municipalities and associations, 58.6 % for the departments, and 41.7 per cent for the regions. In total, subnational government's own-source revenues account for approximately 55% of the total revenues (Garello, 2016). In Japan, it is reported that sub-national governments collect about 33% as own-source revenues (Miyazaki, 2016) and 48% in China (Shen et al,2012).…”

Section: Literature Reviewmentioning

confidence: 99%

The Nature of Local Revenue Decisions within the Decentralized Structures in Kenya

Rutto¹,

Minja²,

Kosimbei³

2022

theijhss

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The Nature of Local Revenue Decisions within the Decentralized Structures in Kenya IntroductionLocal revenue structures reflect the blend of the decisions made at the subnational government level and are affected by the local laws, historical patterns, competitive pressures and administrative realities (Bartle, Kriz & Morozov, 2011). In practice, country-specific factors play a crucial role when considering optimal ways of dividing revenue responsibilities between national and sub-national governments (Fjeldstad & Heggstad, 2012). The local revenue policy is a mixture of principles, practical considerations, political decisions, historical context, and interactions among local governments possibly involving strategic or self-interested behaviour by local actors (Bartle et al., 2011). Furthermore, the administrative capabilities of sub-national governments in developing countries must be taken into consideration when designing revenue decisions (revenue bases and rates) (Modica, Laudage, & Harding, 2018).Subnational governments are creatures of the state, and so the structure of state tax and expenditure policy largely determines the fiscal powers donated to local governments. States always determine which revenue instruments are available to subnational governments and impose tax and spending limits, which further constraints their revenue collection. Thus, the productivity of revenue systems of the subnational governments and their administrative and political acceptability is subject to change (Bartle, et al., 2011). A study by Bartle et al., (2011) reported that external economic, technological and demographic changes and trends are posing a significant challenge to the ability of the subnational governments to generate sufficient own source revenues. These trends are captured by the volatility in sales tax, decreasing property values and diminishing grants from central governments (Fjeldstad & Heggstad, 2012).

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“…In France, Garello (2016) reported that the fiscal transfers on average make up approximately 40 per cent of the total sub-national government's revenue. In Japan, the intergovernmental fiscal transfers make up 31% of the government budget (Miyazaki, 2016) which comprise the tax sharing arrangements where the SNG received about 32% of income and alcohol taxes (Bird & Smart, 2002).…”

Section: Literature Reviewmentioning

confidence: 99%

Intergovernmental Fiscal Transfers and Decentralization Initiatives in Sub-Saharan Africa: A Case Study of SNGs in Kenya

Rutto¹,

Minja²,

Kosimbei³

2022

SDMIMD

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<p>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.</p>

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French sub-national public finances: on the difficulty of being a decentralized unitary state

Cited by 3 publications

References 0 publications

Are Central Government Rules Okay? Assessing the Hidden Costs of Centralised Discipline for Municipal Borrowing

Are Central Government Rules Okay? Assessing the Hidden Costs of Centralised Discipline for Municipal Borrowing

The Nature of Local Revenue Decisions within the Decentralized Structures in Kenya

Intergovernmental Fiscal Transfers and Decentralization Initiatives in Sub-Saharan Africa: A Case Study of SNGs in Kenya

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