Lessons from Spain, Germany and Canada
Studies in Fiscal Federalism and State–local Finance series
Edited by Núria Bosch and José M. Durán
Núria Bosch and José M. Durán Traditionally, countries have been divided into unitary and federal countries, depending on the political system of organization. The former consist of two levels of governments, central and local, while the latter have another tier of government in between, a regional one. However, an increasing number of historically unitary countries are carrying out reforms with the aim of moving toward more decentralized governance. They are not pure federal countries, but at the same time they are not purely unitary any more, since the regional governments, often set up with decentralized purposes, take on a signiﬁcant number of responsibilities previously undertaken by the central government. A key issue in the process of good political decentralization is to ﬁnd an appropriate ﬁnancing system for regional governments. Regions must have adequate revenues to fund their public expenditure requirements so that they enjoy eﬀective autonomy, but at the same time they must also take responsibility for how they raise those revenues. Therefore, the objectives are to achieve autonomy but also ﬁscal responsibility. But in addition, central governments must ensure that all their citizens, regardless of whether they live in a rich or a poor region, enjoy similar levels of wellbeing. Poor regions must also raise enough revenues to fund their responsibilities and achieve national standards. In other words, autonomy and ﬁscal responsibility must be combined with territorial solidarity. This book analyzes political decentralization and ﬁscal federalism, focusing precisely on the ﬁnancing system of regions, and...