Financial Decentralization Research Articles

Carbon Emission Reduction Effect of China’s Financial Decentralization

Due to a lack of focus on China’s financial decentralization system, the existing research does not pay attention to the beneficial contribution of Chinese local governments to carbon emission reduction through their actions in the financial field. In this study, we collected 16 years of data from 30 provinces in China and utilized a two-way fixed-effects model to empirically test the impact of China’s financial decentralization on carbon emission reduction. The regression results show that China’s financial decentralization system has a significant carbon-emission reduction effect. A heterogeneity analysis shows that this effect is common in different regions of China and that fiscal decentralization will negatively moderate it. A mechanism analysis shows that under China’s financial decentralization system, the active intervention of local governments in local finance will significantly upgrade the energy consumption structure and ease the financing constraints of enterprises. The regression results of the spatial econometric model show that the carbon emission reduction effect of China’s financial decentralization still has a spatial spillover effect. Finally, we put forward corresponding policy recommendations.

GOVERNMENT TRANSPARENCY AS UKRAINIAN TERRITORIAL COMMUNITIES’ ECONOMIC DEVELOPMENT FACTOR

The present paper substantiates the government transparency issue's importance as a fundamental principle of management and exercise of power on the local level. It must become a dominant one for Ukrainian urban territorial communities’ socio-economic development regulation under the condition of further steps implementation aimed at strengthening administrative and financial decentralization processes.We elucidate specific characteristics of government transparency measuring global practice, in particular, by applying a methodological approach to the city transparency index calculation, which has been conducted since the end of the 20th century by the NGO "Transparency International".We formulated and tested hypotheses about the relationship presence between government transparency level, income from the payment of personal income tax and local tax by the population, as well as the number of people who voted for public budget projects. We chose Ukrainian cities with different ranking positions by the government transparency level to conduct a measurement.The study proved that the local government transparency level is an important factor in Ukraine’s urban territorial communities’ socio and economic development. We defined that cities’ industrial specialization and their economic diversification level do not influence significantly the correlation density between government transparency level and local budgets' revenues. Additionally, most cities, regardless of their size, are characterized by a high correlation between indicators of transparency and the public activity of residents. Also, we observed a tendency for citizens’ activity to rise in the most investigated communities.The obtained results demonstrated the need to choose a longer time lag to test the proposed hypotheses. Nevertheless, the proven hypotheses made it possible to identify problems in ensuring the transparency of territorial communities’ authorities and to formulate proposals for improving public administration efficiency.

Державна підтримка розвитку громад в умовах фінансової децентралізації

Узагальнено повноваження органів місцевого самоврядування та ресурсне забезпечення їх реалізації. Розглянуто напрями державної фінансової підтримки розвитку громад в умовах децентралізації влади. Визначено можливості економічного розвитку громад за рахунок державної підтримки. Обґрунтовано необхідність стимулювання створення та розвитку економічно спроможних громад.

Financial Ratio Analysis in Assessing Financial Performance of Denpasar City Government for the Year 2018 – 2021

The execution of the standard of decentralization with regards to understanding the local independence of city in the Province of Bali has not been completely ready to investigate provincial pay sources which will uphold the outcome of carrying out territorial independence. Monetary information written in the Regional Government Budget isn't adequate to give sufficient data with respect to monetary administration execution in a specific locale. This exploration looked to evaluate the presentation of territorial monetary administration in Denpasar City during 2018-2021, as estimated by the local monetary reliance proportion, adequacy proportion, productivity proportion, the provincial consumption similarity proportion, the level of financial decentralization proportion and development proportion. Monetary Ratio Analysis utilizing the Budget Realization Report can be an estimating instrument for evaluating the monetary exhibition of nearby government. The exploration results uncovered that the monetary administration execution of Denpasar City during 2018-2021 still generally low in a few proportions explicitly the territorial monetary reliance proportion, productivity proportion, the level of monetary decentralization proportion and development proportion, while viability pro- portion and the local consumption similarity proportion show great monetary execution. It tends to be seen from its low territorial independence and its high reliance on the focal government. Furthermore, the territorial government has not had the option to smooth out the local funds in which provincial consumptions were more prominent than provincial incomes. The development pace of provincial monetary administration can be sorted as bad, since there is a lessening in pay consistently during the estimation time of the financial year.

FINANCIAL DEVELOPMENT OF TERRITORIAL COMMUNITIES UNDER MARTIAL LAW

The financial support of territorial communities is proposed to be considered as a process of formation, distribution and use of financial resources in order to satisfy the needs and interests of citizens in the sphere of all life activities in the relevant territory. At the same time, the main form of financial support of territorial communities remains budget financing, the quality of which depends on the level of their economic and social development. The state of financial support for the development of territorial communities under conditions of decentralization in Ukraine was analyzed. It was found that during the studied period the number of UTC grew quite quickly and by the beginning of 2022 was 1469 units. It was well founded that the main source of formation of own and fixed incomes of local budgets is precisely tax revenues. However, in the conditions of the war, the budgets of the communities underwent significant transformations, became more dependent on transfers from the central budget. Communities had to cut capital spending and direct it to defense and the reserve fund. The financial decentralization of local self-government helped the communities to withstand the conditions of large-scale Russian aggression. Keywords: decentralization, financial support, territorial communities, development.

Theoretical and methodological principles of tax regulation of the development of territorial communities in Ukraine

It is emphasized in the article that in the process of forming tax regulation of socio-economic development of territories in Ukraine is a key place belongs to a clear system of scientific and methodological support. It is proposed to choose a systems approach as the methodological basis of the study, which consists in using the fundamental methodological concept of the system as a single abstract reflection of the objects of reality; identification of key determinants, properties, features and trends of the system; interpretation of the researched problem as a conceptual system. It is established that the study of tax regulation of socio-economic development of territorial communities is an element of the general system of state management of national economy, closely related to the processes of transformation of administrative structure, financial decentralization and improvement of socio-economic indicators of society in Ukraine at the municipal level. The peculiarities, principles and approaches of scientific knowledge inherent in the system method are revealed. The key directions of research of tax regulation of social and economic development of territorial communities in Ukraine are formed. Using the system method, a conceptual model of tax regulation of socio-economic development of territorial communities in Ukraine as a set of interrelated elements of influence on the economic system at the level of a separate territory, including: purpose, objects and subjects of taxation, principles and process of taxation as a financial instrument for socio-economic development of territories. It is proposed to consider tax regulation taking into account: national priorities of socio-economic development of the country; resource opportunities, industry-production, geographical-territorial, socio-demographic and other features of territorial communities; coherence of interests of state and local budgets; ensuring financial self-sufficiency of local self-government; certainty of the direction of development of the tax system, starting from the level of territorial communities.

Research on the Impact of Fiscal Decentralization on Governance Performance of Air Pollution—Empirical Evidence of 30 Provinces from China

Air pollution governance is of great benefit to future generations, and its steady performance improvement is inextricably linked to the fiscal relationships between the central and local governments in China’s decentralization context. Based on the provincial panel data from 2011 to 2019, this paper constructs a comprehensive index of air pollution governance performance using the entropy method. Then, the relationship between fiscal decentralization and governance performance of air pollution is measured using a two-way fixed effects model. The results show that the increase in fiscal decentralization is not conducive to the improvement in governance performance of air pollution. Moreover, fiscal decentralization weakens the positive impact of pollution control investment on enhancing governance performance of air pollution while easing the negative impact of local government capital attraction competition on enhancing governance performance of air pollution. In terms of regional level, fiscal decentralization in northern and inland regions significantly negatively impacts air pollution governance performance. However, the above effects are not significant in the southern and coastal regions. The policy implications of the above findings are as follows: first, the central government ought to optimize the financial decentralization system and promote multiple performance assessments. Second, it is essential to adjust the structure of fiscal spending and promote competitive partnerships among local governments. Third, emphasis should be placed on collaborative governance of key regions while developing an effective incentive mechanism.

FINANCIAL DECENTRALIZATION IN UKRAINE IN THE CONTEXT OF EUROPEAN TRENDS

Decentralization is considered one of the most successful reforms in Ukraine. It has become a decisive factor in the social and economic development of the country. As a result of the reform, a significant amount of powers and sources of financial resources were transferred from the state authorities as close as possible to the people – to territorial communities in the form of local self-government bodies. Decentralization processes are dominant in the developed countries of the world and involve strengthening the financial autonomy of municipalities. However, in contrast to European countries, Ukraine remains a state in which extensive methods of economic development are preserved.The article is devoted to the study of the process of financial decentralization in Ukraine, which was carried out in the context of European trends. It is justified that powers between the levels of power and management should be demarcated according to the principle of subsidiarity. The article analyzes the degree of decentralization of revenues of local budgets of Ukraine and the countries of the European Union. The current system of local taxation in Ukraine has been studied. According to the results of the study, problems related to financial decentralization were identified. The search for ways to increase local communities' own incomes and ways to increase the autonomy of local self-government bodies was carried out. Proposals have been developed to improve the efficiency of tax revenue generation, which aims to help strengthen the financial independence of local budgets at the current stage of development.

Valuing the Ecosystem Services of the forests of Jharkhand State – Its implications for good governance

Ecosystem services are the outcome of ecosystem functions of the forests benefitting human beings and their economies immensely. Valuation and accounting of ecosystem services emanating from forests is not only necessary to generate awareness among stakeholders, but it is essential for green accounting and ensuring environment friendly financial redistribution in a federal setup which is important for good governance and optimum land use planning. The pioneer study calculates the approximate worth of the Jharkhand forests, on the basis of different assessment methodology. These findings have been used to evolve a model for financial decentralization, ensuring an equitable distribution resource which incentivizes environmental conservation (providing baseline evidence to the recommendations of Finance commission i.e., 14 th and 15 th ). Further the assessed value of ES have been compared with the realized value of E.S. (as decided by different recommendations of Finance commission) – which shows that how the concept of “E.S.” is getting grounded in reality. Their use for inferming the developmental policies and measuring the outcomes of policies are future potential of E.S.Valuation.

LOCAL BUDGETS IN THE CONTEXT OF DECENTRALIZATION PROCESSES IN UKRAINE

Some important results of financial and administrative aspects of decentralization in Ukraine as of the beginning of 2022 were discussed. Certain stages of financial decentralization aimed to strengthen the financial base of sub-national governments and to form self-sufficient united territorial communities have been studied. The dynamics of revenues and expenditures of the Consolidated budget of Ukraine in terms of the indicators of the State and local budgets and inter-budget transfers were analyzed. The criteria of self-sufficient united territorial communities have been studied.

PROBLEMS OF FORMATION OF TAX REVENUES OF THE BUDGET OF TERRITORIAL UNITS AND WAYS OF IT OVERCOMING

PROBLEMS OF FORMATION OF TAX REVENUES OF THE BUDGET OF TERRITORIAL UNITS AND WAYS OF IT OVERCOMING

MODERN TOOLS FOR FORMING THE OPTIMAL STRUCTURE OF REVENUES OF TERRITORIAL COMMUNITIES' BUDGETS

The influence of budgetary risks on the formation of revenues of budgets of territorial communities is investigated and a methodical approach to estimating the structure of revenues of budgets of territorial communities in the conditions of financial decentralization is developed. It is noted that today the introduction of the latest methods for optimizing the revenues of the budgets of territorial communities with permanent control over the level of budgetary risks becomes especially important. Mathematical forecasting of the probability of budget risks and its empirical measurement requires special attention. The main approaches of domestic and foreign scientists to forecasting the probability of budget risks with the help of economic and mathematical tools are considered. Its practical use, on the one hand, will ensure their permanent control, and on the other - will allow optimization of the revenues of the budgets of territorial communities. It is established that the existing methods are difficult to implement in domestic practice due to their significant mathematical calculation. Calculations were made using the postulates of portfolio theory, in particular the portfolio approach of J. Hicks, which allowed to form a rational structure of revenues of budgets of territorial communities in terms of general and special funds, as well as to identify ways to minimize budgetary risks to ensure optimal revenue structure without interbudgetary transfers in conditions of permanent crisis phenomena. This will allow local governments of territorial communities to increase the performance of their budgets. The latest tools of financial decision-making using J. Hicks' portfolio approach to the formation of the optimal structure of budget revenues of territorial communities without intergovernmental transfers, taking into account the level of budgetary risk, were obtained by applying the tools of economic and mathematical modeling. It is concluded that the latest tools for the formation of the optimal structure of budget revenues of territorial communities with permanent forecasting of the maximum possible level of their growth under the control of budget risks allow the development of ways to minimize, forming many scenarios for the optimal structure of future budget revenues and budget risk. It is established that the proposed toolkit allows to generate alternative financial solutions for local governments and assess the results and consequences of their possible adoption in determining strategic guidelines for the development of local community finances. It is proposed to further use the developed scientific and methodological approach to optimize the revenue structure of budgets of territorial communities in the context of various budgetary risks, which, of course, will allow local governments to make effective financial decisions in developing programs of socio-economic development of territorial communities.

Public Sector Financial Management Reforms in Developing Economies: Insights from Ghana

Financial decentralization (FD) is key to bringing development closer to the citizenry. Therefore, there is a need to ensure the judicious use of funds mobilized by local authorities to bring about the desired level of development. To achieve this, governments of developing economies have to put measures in place to safeguard funds raised or provided to the public. One of such measures is the continuous reform of laws and regulations governing the mobilization and utilization of public funds. In Ghana, one of such Public Financial Management Reforms (PFMRs) is the Program Based Budgeting (PBB) which is aimed at ensuring the judicious utilization of public funds while meeting the demands of citizens. This study aimed at assessing the impact of PFMRs, with a special emphasis on fiscal decentralization in a selected Municipal Assembly in Ghana. The investigation used the mixed research method (quantitative and qualitative approaches) of data collection. Also, both primary and secondary data were used in this study. Primary data were collected through questionnaires and interviews, while secondary data were retrieved from the institution's financial records. The study results revealed that there exists a positive relationship between PFMRs and FD, and a strong linkage between PBB and Service delivery in Municipal Assemblies. However, the assessment of the impact of PBB on service delivery at the selected Municipal Assembly showed a moderate impact. The study also revealed an improvement in revenue mobilization and expenditure, while noticing that resource dependency remains a challenge at the selected Municipal Assembly. Further, the study identified non-adherence to budgetary allocations, poor budget monitoring, and control systems, and delays in the release of inter-governmental transfers as the challenges hampering the implementation of the PBB in Municipal Assemblies in developing economies (such as Ghana).

Fiscal Decentralization to Promote Carbon Emission Reduction: Based on the Perspective of "Directly Administered Counties"

The reform of "directly administered counties" is a positive attempt to promote the reform of financial decentralization and rationalize the financial allocation relationship between provincial and sub-provincial governments in China, and is an important initiative to stimulate the development of counties. Based on the reform of the "directly administered counties by provinces" system, we attempt to clarify the impact of the "directly administered counties by provinces" reform on the environmental governance of local governments, which is conducive to promoting the construction of local ecological civilization and green economic development, and further providing a basis for China to achieve the "double carbon goal". This article is an attempt to clarify the impact of the "provincial counties" reform on local governments' environmental governance, which is conducive to promoting local ecological civilization and green economic development, and further contributing to the achievement of China's "double carbon goal". The article provides useful reference for deepening the reform of "directly administered counties", optimising the environmental governance of local governments and promoting the "double carbon" initiative.

Penguatan Kelembagaan Organisasi HKBP Berbasis Sentralisasi Keuangan

Institutional HKBP as one of the largest churches in Indonesia or Southeast Asia is still continuing to strengthen governance. As we all know, the internal problems of HKBP as a church organization are still far from what we expect from good and smart governance. So far, the financial decentralization that has occurred in the HKBP has caused various internal problems and ripples. The policy of financial decentralization by giving full authority to churches in the regions, for example, has created income inequality, for example. Many clergy stay in the church with substantial financial resources. With the financial centralization, it is hoped that income distribution, transfer of clergy or pastors can run well and this will strengthen church institutions. With the financial centralization, it is hoped that the church organization can become a good organization so that the mission and vision of the church can run well.

Certain aspects of taxation at the local level

Introduction. The article considers some aspects of taxation at the local level. The legal regulation of local taxes in Ukraine is determined. The purpose of the article is to clarify certain aspects of taxation at the local level. Summary of the main results of the study. The author focuses on financial decentralization, which should result in greater autonomy of local governments in the collection of taxes and fees. It is determined that local taxes are mandatory payments, the amount of which in accordance with the legislation of Ukraine is set by the local government in the relevant territorial-administrative unit and credited to its local budget. The legal bases of local taxation in foreign countries are described. In general, the local taxation of different countries differs significantly depending on various factors, in particular, the general standard of living, socio-economic policy, the level of legal culture of citizens, the properties of the tax system, minimize possible forms of tax evasion. Powers of local self-government authorities to establish local taxes and fees in foreign countries. The most significant shortcomings of local taxation in Ukraine are emphasized, among which: insignificant fiscal role of local taxes and fees, and, consequently, low specific share in local budget revenues, in gross domestic product; a small list of local taxes and fees compared to other countries; lack of absolute independent rights of local governments to introduce their own taxes and fees on their territory; lack of interest of local authorities in attracting additional funds from local taxes and fees; lack of interdependence between the level of public services in a given area with the tax capacity of the population, etc. The focus is on the latest changes in local tax legislation and the conditions for administering certain local taxes. Conclusions. It is concluded that local taxes and fees in Ukraine play an insignificant role in the formation of local government finances compared to the revenues of local budgets of foreign countries. Proposals for improving the local taxation system in the context of financial decentralization have been developed.

Financial Decentralization and Environmental Pollution Research—An Empirical Test Based on Data from 279 Cities in China

By establishing a principal–agent model, this study introduced the local government’s behavior and deduced the local government in the face of incentive policies, which means that it has more power to develop the economy at the cost of environmental pollution. Furthermore, from the perspective of fiscal expenditure structure and local government competition, the influence path of fiscal decentralization on environmental pollution is examined. Thus, this methodology unifies three seemingly different but strongly interrelated hypotheses into one single composite model. Firstly, the bidirectional fixed effect model tests the relationship between fiscal decentralization and environmental pollution empirically and shows that the improvement of fiscal decentralization will aggravate environmental pollution. Additionally, combined with the inverted U-shaped relationship between economic development and environmental pollution, this paper argues that fiscal decentralization has different impacts on environmental pollution at different levels of economic development. Secondly, the results of the mechanism test prove that fiscal decentralization will increase regional competition, increase the scale of foreign capital utilization, and reduce the proportion of local government expenditure for public welfare, thus increasing environmental pollution. Thirdly, heterogeneous regression results demonstrate that fiscal decentralization will increase the environmental pollution of high pollution areas and non-provincial capital cities but has no significant impact on low pollution areas and provincial capital cities. Based on the above conclusions, this paper develops countermeasures to control environmental pollution from optimizing fiscal decentralization structure.

LOCAL TAXATION: PROBLEMS OF CURRENT LEGISLATION

The article highlights basic problems of improving the legislative regulation of local taxation at the present stage. Institutional bases of development of the system of local taxation in Ukraine in the conditions of decentralization are substantiated. The main normative legal acts regulating the collection of local taxes and fees are analyzed. Peculiarities of collecting local taxes and fees, functions of local self-government bodies are considered. The main problems of financial decentralization and local taxation are identified, and the ways of further improvement of the mechanisms of its legal regulation are suggested. It is concluded that not only the legislative base of local taxation needs to be improved, but also the legislation on local self-government through codification. Emphasis is made on the fact that improvement of the legal framework in the field of local taxation should be based on the foundations of the current tax system and should comply with the provisions of the international regulations on local selfgovernment implemented by Ukraine.

What Mechanisms Do Financial Marketization and China's Fiscal Decentralization Have on Regional Energy Intensity? Evidence Based on Spatial Spillover and Panel Threshold Effects Perspectives.

Energy efficiency and energy intensity are gradually gaining attention, and it is now an important proposition to reconcile financial marketization, fiscal decentralization, and regional energy intensity. Using Chinese mainland provincial panel data (except Tibet) from 2007 to 2019, this study applied the dynamic panel system generalized method of moments model, the spatial Durbin model, and the panel threshold model to investigate the mechanisms of financial marketization and fiscal decentralization on regional energy intensity. The study found that financial marketization can play a significant role in suppressing regional energy intensity, while fiscal decentralization promotes energy intensity. Meanwhile, financial marketization in one province can have a negative spatial transmission effect on energy intensity in other provinces, while fiscal decentralization in one province has a negative spatial spillover effect on energy intensity in other provinces. Based on the analysis of the moderating and threshold effects, financial marketization not only moderates the negative externality of fiscal decentralization, making it inhibit energy intensity in the opposite direction, but also gradually increases the moderating effect on fiscal decentralization as the degree of financial marketization increases, showing a nonlinear inhibiting effect on regional energy intensity.

Village Development Initiative as an Alternative Strategy of Rural Poverty Reduction: An Evaluation of Village Fund Program in Indonesia

Law Number 6 of 2014 on villages has been ratified due to the persistent poverty suffered by the village community. Through financial decentralization (Village Fund Program) as regulated in the law, poverty reduction policies are expected to be applied by the lowest level of government. This study aims to evaluate the contribution of the Village Law to reducing poverty. Therefore, this study is important not only to assess how deepening process of decentralization works but also evaluate its impact to reduce rural poverty in Indonesia. The study was conducted in three regions in Indonesia, namely West Sumatra, East Java, and North Maluku Provinces represents the western, central, and eastern regions of Indonesia respectively. The findings indicate that although the studied village governments did not specifically design a development program for poverty reduction in their budget, access to basic needs and public facilities improved and rural unemployment reduced significantly.