FISCAL DECENTRALIZATION - WORLD EXPERIENCE AND OUR PRACTICE

Abstract

Although it is yet to be systematically investigated where the initiative for fiscal decentralization came from, limited evidence suggests that decentralization offers great opportunities to improve the delivery of public services, and that the result depends on the type of decentralization that has been implemented and the institutions that implement it. Not rare are the examples that decentralization is implemented haphazardly without a proper legal framework and clearly defined rules or is simply imported from another country, without taking into account whether the local authorities in the country are able to carry out their responsibilities. Decentralization is often a matter of political reality, and in itself, it is neither good nor bad.
Fiscal decentralization is especially topical in many countries due to fears of further growth in public spending. Data on the extent of public spending in most countries, especially in the last two decades show the constant increase in public spending in GDP. The results of numerous studies on the subject indicate the high degree of correlation between fiscal decentralization and growth of public spending in a way that centralization is associated with a greater share of public spending in GDP. Therefore, a part of the professional community has long held the view that fiscal decentralization contributes to greater efficiency in the allocation of resources and reduces the amount of public spending.