Principles Of Fiscal Federalism Research Articles

Special features of territorial tax incentives to accelerate economic growth

Subject. The article addresses special aspects of territorial tax incentives to accelerate economic growth Objectives. The aim is to identify the specifics of territorial tax incentives for economic growth and develop proposals to use them. Results. The study reveals features of territorial tax incentives for economic growth. The benefits are provided from own sources of budgets of subjects of the Federation and municipalities, i.e. property taxes (corporate property tax, land and transport taxes) and income tax. The privileges are available in preferential territories (SEZ, TASED, TAD) and are granted to industrial parks, technology parks, and those implementing regional investment projects (RIP) and special investment contracts (SPIC). The paper presents recommendations for using the identified specifics. They include a differentiated approach to the development of territorial tax incentives within non-subsidized and subsidized regions; assessment of the possibility of increasing the number of non-subsidized and low-subsidized budgets based on the principles of fiscal federalism; improving the administration and control, including the use of digital technologies, to ensure an accurate assessment of tax expenditures (lost income) of the property tax budget when making decisions on the application of territorial tax incentives. Conclusions. The recommendations are addressed to regional authorities and local self-governments for consideration and approval of projects of residents of preferential territories, business entities, RIP and SPIC that contribute to the acceleration of economic growth, specialists developing and improving tax incentives for economic growth.

IMPLEMENTATION OF THE PRINCIPLES OF FISCAL FEDERALISM UNDER CONDITIONS OF MILITARY RISKS AND THREATS

The work focuses on the prospects of implementing the determinants of fiscal federalism into Ukrainian practice in terms of risks and threats to the national security. It is argued that an effective budget and tax policy based on the principles of fiscal federalism can strengthen the social and economic development of Ukraine and its territorial communities under conditions of the martial law and postwar state building.

CORRELATIONAL MONITORING OF FISCAL FEDERALISM IN THE CENTRALIZED AND DECENTRALIZED SYSTEMS OF THE EUROPEAN UNION

Introduction. Modern pandemic threats, military-political tensions and conflicts, foreign economic risks, trade wars, financial imbalances encourage the EU countries to group and agglomerate financial potentials in the vertical and horizontal planes. There is a need to study the paradox of what role in this agglomeration is played by the mastery of using the principles of fiscal federalism, tested by a number of both unitary states and federal republics of the European continent. The purpose of the article is to monitor the main determinants of fiscal federalism in increasing the financial potential of the member states of the European Union. Method (methodology). In the course of the research, the following methods were used: dialectical, correlational, generalization, comparison, system analysis, observation, induction and deduction. The results. The article highlights the importance and place of fiscal federalism in the architecture of the financial policy of the European Union. Pragmatic aspects of financing public services in the member states of the European Union have been studied. This made it possible to identify active recipients in the field of attracting financial resources to ensure the priority needs of economic development. It is emphasized that the functional direction of general public spending in the European Union was aimed more at social protection and health care, and to a lesser extent at environmental protection and development of the housing and communal sphere. It has been established that most of the member states of the European Union combine the principles of centralization, federalism, and decentralization (in most cases) in their fiscal doctrine, but there are also clear systems of classical fiscal federalism (Germany, Switzerland). The European approach emphasizes that a secondary effect of globalization is excessive tax optimization, because the functioning of the integrated market makes tax evasion more attractive. An assessment of the influence of key parameters of fiscal federalism on the functioning of centralized and decentralized models of financial policy was carried out. This made it possible to identify the level of influence of the determinants of fiscal federalism on the relevant model through the prism of distinct factors. It is summarized that the use of determinants of fiscal federalism in the financial policy of the European Union is able to strengthen the budgetary and tax effects, which in the final (transformed) vector will lead to a strengthening of the economy and improvement of social standards both in the member states of the union and in individual municipal entities.

ВПЛИВ ПОДАТКОВИХ ІНСТРУМЕНТІВ ФІСКАЛЬНОГО ФЕДЕРАЛІЗМУ НА СОЦІАЛЬНО-ЕКОНОМІЧНИЙ РОЗВИТОК ТЕРИТОРІАЛЬНИХ ГРОМАД

Anthropological values in the modern local economic development conduct to the rationalization of intellectual abilities in the focus of decision-making to expand the financial resources of united territorial communities. The article examines the current processes of financial support for the functioning of newly created administrative-territorial units during the decentralization reform. Elements of fiscal potential of territories are systematized, among which the main role belongs to tax revenues. The dynamics of revenues to local budgets in Ukraine is analyzed and the dependence of community budgets on such state regulatory instruments as subventions and dotations is established. Emphasis is placed on strengthening the budgetary autonomy of local governments on the principles of fiscal federalism, which are extensively used in the unitary states of the world. This approach will improve social standards and infrastructural development of local communities. Considerable attention is paid to the study of the role of local (property) taxes in stabilizing the financing of priority needs of the population of territorial communities. It is established that an extensively fiscal resource in the economic development of the regions of Ukraine is the real estate tax. This aspect is confirmed by foreign experience. Forecasting of real estate tax revenues other than land to the budget of the Ternopil City Territorial Community has been made. The forecast was based on two tax rates (1% and 1,5%). In the article is determined that the fiscal role of real estate tax, other than land in the structure of local taxes and fees of Ukraine is insignificant. The peculiarities of the post- war development of the economy of the united territorial communities in Ukraine on the basis of tax instruments of fiscal federalism are outlined.

Еволюційна парадигма фіскального федералізму: трансформація досвіду США в український децентралізм

The modern paradigm of effective social and economic development of regions must take into consideration the dialectics of fiscal federalism in the symbiosis of its essential determinants with fiscal decentralization. The purpose of the article is to scientifically and conceptually substantiate the model of fiscal federalism of the United States of America in the field of implementation of adequate provisions into Ukrainian decentralization. The article examines the conceptual provisions of fiscal federalism, substantiates the forms of decentralization of powers among levels of government. The architectonics and evolutionary paradigm of fiscal federalism in the United States of America are covered. The risks and effects of fiscal federalism were monitored for the purposes of implementing its basic aspects into Ukrainian practice. Theories of the first and second generations of fiscal federalism are considered. It is ascertained, that the principles of fiscal federalism are used in the practice of unitary countries. Public authorities actively apply mechanisms of cooperation with municipalities in the context of delegation of tax and expenditure powers. Emphasis is placed on the tax component of the intensification of fiscal autonomy of local governments. At the same time, the experience of the United States of America has shown the importance of directing grants and transfers to social projects of municipalities. The priorities of adaptation of actual postulates of fiscal federalism into Ukrainian system of interbudgetary relations under conditions of decentralization of powers are outlined. It is emphasized that fiscal federalism should not be limited to the redistribution of financial resources between the State and local governments. It should encourage amalgamated territorial hromadas to financial autonomy and increase tax potential to improve the prosperity of citizens

Assessing Regional Inequality based on Revenues of the Federal Budget using the Pareto Principle

The use of fiscal instruments for regulating territorial development has both positive and negative macroeconomic effects related to the withdrawal of revenue from more economically developed regions. Therefore, using the Pareto principle, this paper assesses the negative effects of budgetary reallocation. This study considers inter-budgetary reallocation as an annually recurring four-stage process of regional budgets reproduction. The article analyses the firs t stag e o f th e process , namely , the creation of resource allocation base. A hypothesis has been tested to examine whether the centralisation of tax revenues in the federal budget and, consequently, an increase in inter-budgetary reallocation does not reduce, but exacerbates inequality in regions due to their revenue depletion and limited self-development. The study assessed the contribution of federal districts and individual constituent entities of the Russian Federation to the federal budget, withdrawal of regional revenues, and the concentration of territorial revenues to the federal budget. Based on the ranking of regional contributions to federal revenues, I built a Pareto diagram, checking the 80/20 rule for grouped and non-grouped data. Calculations and comparison of the data for 2017 and 2010 confirm numerous negative effects. For example, there is an increase in the withdrawal of regional revenues and a significant concentration of federal revenues for a limited number of regions. Additionally, negative effects include the existence of a direct relationship between regional revenues and the rate of their withdrawal, as well as the predominance of the equalising component over the stimulating one in regional socio-economic development. These effects lead to revenue depletion in the territories and increased centralisation of budgetary resources, contradicting the principles of fiscal federalism. Authorities can use the research results, conclusions and suggestions for managerial decision-making to improve intergovernmental relations in the Russian Federation.

Financial decentralization in Ukraine: prerequisites, problems, prospects

The purpose of the article is to analyze the prerequisites, advantages, problems and prospects for the development of the processes of financial decentralization in Ukraine. Initially, the article reveals the features of the federal and unitary arrangements of states. As research has shown, the principles of fiscal federalism have been increasingly used by unitary states. The legislative and normative legal acts regulating the implementation of the decentralization policy in Ukraine are justified and given. Characteristics of the formation of new structures, such as: united territorial societies and their sources of financing are characterized. Changes in incomes in local budgets as a result of decentralization are analyzed, and their significant growth is observed. The mechanism of horizontal leveling of the tax ability of territories has been developed, which helps to remove imbalances and unevenness, most of the budgets of Ukraine are recipients of budgetary funds, since they receive a basic subsidy. The influence of the development of information technologies on entrepreneurial activity in small towns and villages is determined. Information technology is a tool of points of growth of territories. Decentralization will not gradually increase due to urbanization processes, but will be accompanied by new development mechanisms, where the labor force and the means of production will unite and help create a qualitatively new environment.

Організація міжбюджетних відносин в Україні на принципах бюджетного федералізму

Організація міжбюджетних відносин в Україні на принципах бюджетного федералізму

AR EUROPOS SĄJUNGOS BIUDŽETO POKYČIAI ATITINKA FISKALINIO FEDERALIZMO PRINCIPUS – LYGINAMOJI 2007–2014 METŲ BIUDŽETŲ ANALIZĖ

The fiscal federalism theory was developed to explain budget formation in independent states. At present, this theory is often applied to supranational institutions like the European Union (hereinafter EU), without paying enough attention to the unique characteristics of this level of analysis. This article identifies which assumptions of the classical fiscal federalism theory cannot be applied to the supranational level. After modifying these assumptions and adding the public choice theory and political economy insights, the fiscal federalism theory is applied to describe the EU budget. This paper answers the question of whether changes in the EU budget of 2014 were in line with the normative principles of the fiscal federalism. It was found that changes in the EU budget fwere not systematic: while we can see the progress in the implementation of the principles of fiscal federalism in some policy fields, regression and the lack of positive changes are observed in others. Recommendations to the policy makers how the EU budget could be improved are presented in the conclusions. This paper presents a comparative analysis of the policy fields from two multiannual financial frameworks (2007–2013 and 2014–2020 years). It assesses the evolution of the financing (increase, decrease, no change) and the structure of the seven policy areas. The budget of the fiscal year 2007 is considered as the reference point. Financing the analyzed policy fields makes up 80% of the EU budget. The ECORYS Report (ECORYS Nederland BV, 2008) has already given a comprehensive analysis of the 2007 fiscal year budget in accordance to its compliance with the principles of fiscal federalism. The report also discusses the recommended quantitative changes in future budgets. This article evaluates not only the quantitative but also qualitative changes in the EU budgets throughout the period 2007–2014. The agreement about the new multiannual financial framework had to be made under more unfavorable conditions than the last framework. Negotiations involved more than ever players, players’ preferences were very different, the decision-making rules were amended – a new institutional authority was added (European Parliament), Euroscepticism significantly increased, finally, some goals of the Europe 2020 are inconsistent with the fiscal federalism principles. Perhaps because of these circumstances, progress in reforming the EU budget in accordance with the principles of fiscal federalism has not happened. Amongst the seven policy fields, positive changes were recorded in four, negative – in two, more negative than positive – in one policy field. Despite the fact that there were positive developments in the vast majority of policy fields, the financing of these fields makes up only ~38.9% of the EU budget. Meanwhile, funding for the remaining three areas consists of ~40.6% of the EU budget (2014 EU budget -142641 million euros). On this basis, we cannot say that the first of the EU budgets (the 2014 budget) in the new multiannual financial framework is more in line with the principles of the fiscal federalism than the previous financial framework’s first budget (the 2007 budget).

Fiscal Federalism: a refined theory and its application in the Chinese context

China's central–local relations have been marked by perpetual changes amidst economic restructuring. Fiscal decentralization on the expenditure side has been paralleled by centralization on the revenue side, accompanied by political centralization. Hence, our understanding of China's fiscal relations is not without controversy. This paper aims to make a theoretical contribution to the ongoing debate on ‘fiscal federalism’ by addressing crucial questions regarding China's central–local fiscal relations: first, to what extent do Chinese central–local fiscal relations conform to fiscal federalism in the Western literature? Second, are there any problems with existing principles of fiscal federalism and, if so, how to refine them? Third, how are refined principles relevant to the Chinese case and what policies should the Chinese government pursue in the future? Based on an in-depth and critical review of the theories on fiscal federalism, we develop a refined prototype of fiscal federalism. The model shows that quasi-traditional fiscal federalism is a much closer reality in China, while we argue that the refined fiscal federalism should be the direction of future reform in China.

HISTORICAL EVOLUTION OF FEDERAL FINANCES IN INDIA

The paper confirms that the provisions of fiscal federalism laid out in the IndianConstitution are connected to the legacy of the British rule in India. Applying historicalanalysis the author divides the period from the starting of British imperial administration inIndia to the enactment of Indian Constitution into five different phases on the basis of theevolution of Centre-Province financial relations. The principles of fiscal federalism in Indiagradually evolved from highly centralized fiscal governance during the initial period of theBritish rule until being manifested in the Constitution. Various parliamentary enactments,executive directions, committees and commissions as well as individual interventioncontributed to this transformation. The paper further lays out the unique features of theIndian Constitution such as mutually exclusive tax domains and various mechanismsaddressing fiscal imbalances due to the Government of India Act of 1935 enacted by theBritish Parliament. It concludes that while British authorities designed the system of fiscaladministration in India after their preferences, the makers of the Indian Constitution preferredto retain the same provisions with minor variations in the Constitution of independent India.

Evolution of Russian Fiscal Federalism

The article considers the state and prospects of development of fiscal federalism in Russia. The most important shortcomings of the system of budgetary regulation have been revealed and analyzed; the subsidiary nature of regional and local budgets forming has been proved. The conclusion about the deviation from the universally recognized principles of fiscal federalism in Russia and returning to the policy of centralized managing of state financial resources has been drawn.

Patterns and Principles of Fiscal Federalism in Belgium

The territorial financial arrangements in Belgium reflect the bipolar and centrifugal logic of Belgian federalism. The structure of the Belgian federation is a political reflection of a territorialized language conflict, in part overlaid by inter-regional economic disparities. Discussions about territorial finance are always part of broader negotiations between a richer, Flemish north and a less wealthy, Francophone south about the way in which the two can remain in a common state. While tracing the evolution of Belgium's fiscal federalism before 2001, the contribution focuses on a new settlement achieved in major negotiations in 2001. This settlement established a more stable financial underpinning for Belgium's linguistic Communities (Flemish, Francophone, German) while allowing its economic Regions (Flanders, Wallonia, Brussels) greater fiscal autonomy. It is doubtful, though, that even this latest set of negotiations will provide an enduring basis for Belgian territorial finance.

Fiscal Federalism in South Africa

The constitutional change in South Africa in the 1990s brought about the decentralization of substantial budgetary responsibility to newly created provincial governments. This study captures the new assignment of functions and resources to the different spheres of government in South Africa and provides an assessment on the basis of a framework derived from fiscal federalism principles. It concludes that there is a substantial congruence between what can be viewed as theoretically desirable and what is outlined in the South African Constitution of 1996, but observes significant divergences between the Constitution and actual practice.

A fiscal federalism approach to infrastructure policy

This paper presents a fiscal federalism perspective on infrastructure policy. It begins by looking at the theory of fiscal federalism and then turns to the actual division of the responsibility for providing public capital in the United States. The paper then argues that it is difficult to square theory and actual practice: a good case can be made that national infrastructure policy is inconsistent with the principles of fiscal federalism in a number of important respects. The final sections of the paper look at two specific issues in federalism, the tax exempt municipal bond market and interjurisdictional competition.