Fiscal Federalism and Political Decentralization

Fiscal Federalism and Political Decentralization

Lessons from Spain, Germany and Canada

Studies in Fiscal Federalism and State–local Finance series

Edited by Núria Bosch and José M. Durán

This book analyzes political decentralization and fiscal federalism in Canada and Germany, both traditional federal countries, and in Spain, a unitarian country engaged in the last two decades in a process of decentralization. Three key issues required for a well designed financing system are analyzed in depth, namely: tax assignment, equalization grants – i.e. redistribution of money from the wealthy regions or the national government to poorer regions, and the role of local governments in the administration of taxes.

Chapter 1: The Financing System of Spanish Regions: Main Features, Weak Points and Possible Reforms

Núria Bosch and José M. Durán

Subjects: economics and finance, political economy, public finance, politics and public policy, political economy, public policy


1. The financing system of Spanish regions: main features, weak points and possible reforms Núria Bosch and José M. Durán 1 INTRODUCTION In the last 25 years, Spain has undergone a very important process of political and fiscal decentralization. The Constitution of 1978 created an intermediate level of government, the Autonomous Communities (ACs hereafter), covering autonomous regions that have received considerable powers and responsibilities from the state. In about 30 years, Spain has gone from being a unitary, centralized country to a highly decentralized one, where ACs play an essential role in the provision of public services and take up a significant share of public revenues. As a consequence, if we see Spain from an international perspective, its current situation is nowadays closer to the federal countries than to the unitary ones, although it is not a federal country from a legal point of view. Undoubtedly, the Spanish experience in decentralization is significant from an international perspective, since it may be a reference for a number of historically unitary countries that have started a political process of decentralization more recently, or wish to do so. For that reason, the aim of this chapter is to describe the most outstanding features of the financing system of the Spanish ACs, with reference to the more recent reforms and paying particular attention to their problems and further possible reforms. The chapter is divided into six sections, including this introduction. The second section describes the institutional organization at territorial level...

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