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Fiscal Decentralization and Local Finance in Developing Countries

Development from Below

Roy Bahl and Richard M. Bird

This book draws on experiences in developing countries to bridge the gap between the conventional textbook treatment of fiscal decentralization and the actual practice of subnational government finance. The extensive literature about the theory and practice is surveyed and longstanding problems and new questions are addressed. It focuses on the key choices that must be made in decentralizing, on how economic and political factors shape the choices that countries make, and on how, by paying more attention to the need for a more comprehensive approach and the critical connections between different components of decentralization reform, everyone involved might get more for their money.
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Index

Development from Below

Roy Bahl and Richard M. Bird

accountability 6, 1215, 42, 75, 789, 88, 89, 957, 1078, 140, 169, 213, 224, 25961, 299, 396, 399, 4013
dual 6, 42, 44, 96, 140, 224
link to autonomy 89
see also metropolitan areas
accrual budgeting, see budgeting
Addis Ababa 250, 380
administration, local 3623
see also local government; tax administration
administrative costs 212, 225, 258, 288, 321
Afonso, José Roberto 122
Africa 285, 344
agglomeration economies 222, 285, 341, 344, 361
agricultural land 193, 25961, 389
Ahluwalia, Isher 361
Ahmad, Ehtisham 60
Ahmedabad 237, 362
Albania 100, 161
Alegre, Juan 124
Alexeev, Michael 320
Alm, James 319, 325
Andres, Luis Alberto 145
Angola 26
annexation, see mergers
Annez, Patricia 158
Antioquia 250
appeals 256, 275
Araujo, M. Caridad 59
area-based competition 126
area-based property tax, see property tax
Argentina 38, 105, 147, 162, 195, 196, 204, 223, 234, 376, 395, 396, 409
borrowing 24, 221
tax sharing 289, 294, 298, 299
transfers 313, 314, 320
turnover tax 2078, 369
see also Buenos Aires
Armenia 213
Artana, Daniel 320, 369
assignment, see expenditure assignment; tax assignment
asymmetry 20, 268, 35, 129, 141, 204, 274, 314, 3489, 4068, 417
audit 11213, 316, 326, 363
Australia 194, 203, 239, 268, 291, 295, 304, 323, 324, 328
Austria 200
authority, need for 140
see also accountability
autonomy 40, 8990, 142, 188, 191, 192, 4013
limits on 6990, 93, 191
see also autonomy; conditional grants; mandates; taxing power
Bach, Steffen 40
bailouts 135, 153, 155, 178, 403
banded property tax 240
Bangalore (Bengalaru) 218, 237, 239, 249, 362
Bangkok 295, 360, 380, 381, 387
Bangladesh 63, 105, 143, 289, 320, 407
bankruptcy, municipal 186, 351
barangays, see Philippines
Barankay, Iwan 60
Barco Vargas, Virgilio 349
Bardhan, Pranab 39
Barenstein, Matias 59
basic needs 323
Baskaran, Tushyanthan 56
Basurto, Pia 63
Beijing 387
Belo Horizonte 255
benchmarking 45
benefit model 142, 16877, 221
benefit taxes 129, 147, 188, 205, 211, 222, 25960, 378
Besley, Timothy 126
betterment 267
see also value capture
Bhattacharyya, Sambit 309
Bhutan 10
‘big bang’ reform 65, 89, 395
vs. gradualism 65, 396, 4046
Blöchliger, Hansjörg 67, 190
block grants 313
Boadway, Robin 55, 86, 328, 394
Boex, Jameson 319, 325
Bogotá 249, 250, 254, 256, 267, 348, 357, 359, 369, 372, 380
Bolivia 18, 126, 149, 158, 194, 303, 311, 391, 413
decentralization 41011, 421
borrowing, subnational 245, 122, 143, 1527, 167, 176, 221, 383, 395
limiting 1556
packaging 1536, 392
see also debt
Bosnia and Herzegovina 18
Bossert, Thomas 61
Botswana 2523
brain drain 345
Brazil 8, 12, 13, 16, 24, 25, 28, 42, 52, 91, 105, 122, 147, 187, 193, 204, 234, 238, 276, 303, 316, 375, 384, 386, 395, 396, 407, 409
property tax 242, 250, 252, 255, 259
service taxes 206, 369
state VAT 195, 202, 206
tax sharing 291, 299, 326
transfers 23, 306, 312, 314, 320, 325
value capture 267, 268, 269
see also São Paulo
Brennan, Geoffrey 188
Breton, Albert 14, 172
Breuss, Fritz 55
Brodjonegoro, Bambang 319
Buchanan, James 188
Bucharest 293
Budapest 292, 356
budget constraint 24, 1857
see also hard budget constraint; soft budget constraint
budgeting 11314, 118, 179, 223, 363
capital 17980, 402
cash and accrual 11011, 223
transparency 96, 111
see also fiscal gap; PFM
Buenos Aires 254, 345, 357, 361, 369, 372
Bulgaria 356
business property tax 169, 174, 210, 222, 237, 246
see also property tax
Byrnes, Joel 83
cadaster 242, 248, 24950
Cairo 380
CAMA (computer assisted mass appraisal) 253, 263
see also tax technology
Cambodia 7, 12, 129
Cameroon 294
Canada 35, 52, 77, 83, 116, 117, 129, 192, 211, 262, 268, 275, 279, 334, 335, 347, 352, 357, 359, 390
equalization 186, 295, 304, 331
piggybacked taxes 21516
VAT 297, 335
see also Toronto
Canberra 268
capacity, see administration; fiscal capacity; local governments
Cape Town 254, 352, 360, 387
capital account 17880
see also budgeting; deficit
capital gains tax 263
capital grants 179, 180
see also infrastructure; transfers
capital value, see property tax
Capuno, Joseph 325
cascading, see tax cascading
Case, Anne 126
case study approach 31, 41, 45, 56
cash transfer schemes 105, 127
Catalonia 17, 347
CDD, see community-driven development
Central African Republic 237
central government, key role 101, 110, 112, 133, 135, 214, 274, 382, 385, 392, 408, 418
CEPACS 269
champions of decentralization 387, 41013
of grants 295, 308
Chelliah, Raja 184, 320
Chen, Xian 126
Chile 105, 136, 258, 359, 382
property tax 231, 239, 242, 246, 250
China 6, 10, 13, 15, 42, 52, 69, 78, 84, 88, 102, 105, 126, 128, 154, 159, 192, 197, 204, 279, 283, 315, 341, 362, 376, 380, 387, 392, 396
decentralization 53, 224, 37, 398, 404
earmarking 94, 307
expenditure assignment 100, 304
extrabudgetary levies 184, 203, 216
fiscal disparities 285, 299, 324, 325
land sales 1489, 223, 266, 268
local business tax 44, 217, 300, 367, 370
local expenditures 87, 91, 314
tax sharing 291, 293, 296, 320, 381
VAT 292, 300, 370
cities, see metropolitan areas
citizen report cards 96, 118
see also community score cards; surveys; transparency
collection-driven reform 255, 2712
collection rate 255, 271
Cnossen, Sijbren 264
Collier, Paul 364
Colombia 7, 10, 12, 16, 18, 20, 32, 33, 58, 77, 89, 90, 92, 104, 126, 1312, 149, 159, 161, 196, 204, 206, 213, 234, 250, 254, 267, 316, 356, 367, 375
benefit financing 129, 147, 222
decentralization process 103, 138, 315, 396, 406, 416
monitoring grants 327, 333, 409
property tax 246, 256, 277, 373
subnational expenditures 87, 279
transfers 23, 294, 295, 308, 312, 320, 325, 392
turnover (industry and commerce) tax 195, 208, 218, 369
see also Bogotá
Commonwealth Grants Commission 328
communal ownership 243
community-driven development (CDD) 6, 989
community score cards 96, 118
see also citizen report cards; transparency
comparative approach 31, 45, 66
compliance cost 212, 225, 256, 322
concurrency 1256
see also expenditure assignment
conditional grants 40, 81, 87, 89, 945, 134, 150, 151, 2878, 281, 3067, 31216, 401
see also externalities; transfers
connection fees 145, 379
contingent liabilities 182
contracting 85, 102, 116, 130, 132, 1367, 1578, 160, 161, 173, 253
intergovernmental 5, 85, 102, 129, 296, 352, 359, 379
see also fiscal contracting; privatization; public–private partnerships
Copenhagen 354
corporate income tax 202, 211, 2978
correspondence principle 169, 201, 205
see also benefit model; linkage; Wicksellian connection
corruption 2930, 58, 59, 60, 66, 92, 1078, 118, 138, 161, 173, 215, 220, 266, 310, 3956, 419
cost reimbursement grant, see conditional grant
cost–revenue ratio 258
see also administrative costs
Côte d’Ivoire 237, 294
Craig, Jon 156
credit market 150, 153, 154, 383
see also borrowing; debt
Croatia 251, 256
Crook, Richard 63
crowding out 200, 219, 235, 348, 385
see also fiscal competition
Cuba 12
current use value 260
Cyan, Musharraf 52, 200
Danegeld 34
Das, Jishnu 78
data, need for better 28, 31, 34, 47, 54, 66, 118, 305, 315, 324, 415
see also IMF; ICTD; OECD; World Bank
DAU (revenue-sharing grant) 311, 336
Davoodi, Hamid 29
De, Indrandil 59
De Cesare, Claudia 231, 243, 253
De Mello, Luis 59, 202
De Ree, Joppe 78
De Silva, Migara 385
debt 18, 68, 1345, 153, 395
see also borrowing
decentralization 30, 119, 140, 191, 220
dangers of 3957
and infrastructure 1212, 162
key role of central government 1415, 25
measurement of 3044
reasons for 722
reform, comprehensive 140
sequence 41617
see also gradualism
see also asymmetry; ‘big bang’ reform; champions; deconcentration; delegation; fiscal decentralization
decentralization effect 280
decentralization theorem 89, 149, 18990, 224
deconcentration 45, 27, 89, 102, 142, 191, 290, 395, 494
deficit 178, 18083
delegation 57
see also contracting; principal–agent relationship
Delhi 237, 250, 367, 373, 380
democracy 1215, 86, 169, 171, 350
see also accountability; elections
Denmark 93, 132, 238, 354
density, economies of 117
derivation basis 149
see also horizontal sharing; tax sharing; transfers
Detroit 186
development charges 268
Devkota, K.L. 55
devolution 4, 8, 60, 286, 394
Dillinger, William 209
direct expenditure controls 9091
see also mandates
disaster relief 308, 403
discount rate 178
distributable pool, see transfers
distributional goals 82, 1038, 145, 217, 278
see also inequality; poverty alleviation; redistribution
Dollery, Brian 83
donors, see foreign aid
dual accountability (dual subordination), see accountability
Dunn, Jonathan 102
Duranton, Gilles 341
earmarking 94, 134, 173, 306, 307, 313, 338, 354, 370, 378, 391
for infrastructure 112, 116, 148, 265
see also conditional grant; intercept; special district
East Africa 195
East Timor 20
economies of scale 26, 825, 945, 128, 12932, 345, 350, 351, 361
in tax administration 212, 21415
Ecuador 59, 251, 257
education 779, 84, 867, 88, 89, 9091, 101, 136, 225, 307, 389
Egypt 13, 16, 245, 87, 100, 254, 283
El Salvador 257
elections 12, 33, 956, 191, 399, 421
see also accountability; democracy; malapportionment
electricity tax 367
elite capture 6, 13, 59, 60, 80, 128, 149, 161
Eller, Markus 55
empowerment 47, 14, 39, 58, 67, 73, 107, 234, 394, 399
enforcement 2567, 377
entitlement 180, 292, 300, 379
equalization 63, 66, 204, 2857, 3225, 336, 381, 388, 407
see also inequality; regional disparities; transfers
Estache, Antonio 29
Estonia 238
Ethiopia 18, 250, 303, 306, 325, 380
European Union 117, 121, 149, 297
ex ante and ex post control 11011, 1556
exactions 2678
excises 193, 203, 2067, 298
exclusion principle 176
exemptions, see property tax; threshold
expenditure assignment 747, 97103, 115, 118, 1256, 13941, 304
expenditure needs 284, 302, 3034, 313, 323, 324, 328
expert capture 128, 226, 304, 420
see also foreign aid
externalities 25, 8082, 90, 126, 132, 2878, 352, 358, 374
see also conditional grants; fiscal externalities; spillovers; transfers
extra-budgetary levies 184, 203, 216
Faguet, Jean-Paul 18, 59, 126
Fan, C. 60
federations 15, 32, 52, 61, 75, 102, 116, 118, 155, 221, 224, 347, 421
finance commission 327, 32831, 409
finance follows function 51, 52, 71, 197, 353, 416
Finland 834, 132
fiscal appeasement 20
fiscal capacity 150, 283, 301, 304, 320
fiscal competition 6, 578, 69, 104, 126, 188, 2013, 213, 351, 358, 386
see also crowding out; yardstick competition
fiscal contracting 344
see also contracting
fiscal decentralization 51, 413
costs of 2230
definition 47, 37
determinants of 1011, 36, 4552, 65, 68
effects of 9, 5364
level of 4552, 878, 394
as a system 397, 398401
theory of 9, 11, 45, 75, 8087, 139
see also decentralization theorem; second generation
see also champions; decentralization; measurement
fiscal dentistry, see fiscal gap
fiscal discipline 109, 11213, 184, 397
see also budget constraint
fiscal disparities, see regional disparities
fiscal externalities 190
fiscal flows 3468
fiscal gap 184, 320, 344, 403
see also vertical balance
fiscal health 180
fiscal laziness, see tax effort
fiscal mischief 178, 1814
see also soft budget constraint
fiscal responsibility law 24, 152
Fiszbein, Ariel 138
floating debt 18
floor area ratio (FAR) 266, 267, 268
foreclosure 256
foreign aid (assistance) 227, 315, 327, 3323, 401, 409, 411, 413, 41415
see also expert capture
formula grants, see transfers
Fox, William 84
fractionalization 40, 49, 68, 350
fragmentation 3537
France 209, 218, 254, 354, 357
Frank, Jonas 136, 1767
Franzen, Riel 251, 252, 372
free riding 86
Freire, Maria 361, 364
Friedman, Jonathan 158
fuel subsidy 375
fuel tax 206, 3745
fungibility of money 2878, 307
Gabon 294
Gaebler, Ted 25
gambling, taxation of 3678
gaming, intergovernmental 292, 294, 301
Germany 20, 38, 41, 52, 186, 192, 265, 269, 291
GFS data 30, 37, 389, 67, 281
see also IMF
Ghana 253, 254, 294, 345
GIS (geographic information systems) 247, 249, 392
Glaeser, Edward 104, 121, 341, 345, 384
Goel, Rajeev 58
Gomez-Reino, Juan 49
governance 979
see also informality; metropolitan areas
gradualism 139, 401
see also ‘big bang’ reform
graduated personal tax 195, 205
grants, see transfers
grants commission, see finance commission
Gravelle, Jennifer 229
gross receipts tax 2078, 366
see also turnover tax
Grote, U. 63
GST, see VAT
Guatemala 250
Guayaquil 251
Guerra, Susana 285, 324
Gurley, Tami 84
Guyana 12
hard budget constraint 24, 95, 102, 167, 17780, 374, 385, 388, 395, 400, 4034
see also budget constraint
hard-to-tax sector 578, 121, 260
see also informality
headquarters problem 207, 298, 300, 366
health care 119, 313
Henderson, Vernon 50
Hicks, Ursula 167
high-powered money effect 319
see also tax effort
Hirschman, Albert 139
Hofman, Bert 285, 324
‘hold-harmless’ provision 305, 325
homeowner relief 244, 251
Hong Kong 20, 237, 252
horizontal sharing 290, 296308, 337, 382, 388, 392
see also equalization; transfers
hotel tax 367
Human Development Index (HDI) 63, 303
Hungary 1345, 291, 292, 320, 356, 391
Huther, Jeff 50
ICTD (International Centre for Tax and Development) data 39
IMF (International Monetary Fund) 30, 37, 389, 66, 110, 230, 327, 395, 411
see also GFS data
incidence, fiscal 347, 367, 368, 371, 3789
see also inequality; progressivity
income tax 193, 217, 218, 301, 368, 371
see also corporate income tax; personal income tax
increment, land value, see value capture
incrementalism, see gradualism
indexing 254, 260, 275
India 10, 14, 28, 59, 64, 78, 87, 91, 96, 101, 106, 109, 124, 127, 159, 184, 190, 193, 254, 268, 377, 4067, 416
Finance Commission 305, 314, 321, 329, 3323, 409
informal governance 989
infrastructure 151, 364
local taxes 1478, 205, 218, 367, 36970
metropolitan areas 348, 351, 362, 386
octroi1478, 206, 217, 289, 369
panchayats98, 105, 132, 259, 329
property tax 231, 235, 237, 242, 244, 245, 253
rural sector 105, 1078, 137, 136, 198, 25960, 307, 344, 345
state finance commissions 314, 32931
taxing power 44, 184, 192
transfers 134, 295, 306, 324
water supply 84, 101
see also Delhi; JNNURM; Kolkata; Mumbai
Indonesia 10, 16, 19, 20, 45, 6061, 78, 79, 100, 126, 184, 285, 303, 314, 333, 348, 396
deconcentration 5, 27, 89, 102, 142, 290, 395, 404
property tax 234, 235, 259, 373
tax sharing 291, 293, 31011
transfers 23, 160, 305, 306, 319, 324
see also Jakarta
inequality 19, 49, 53, 624, 2034, 285, 341
see also distributional goals; equalization; poverty alleviation; redistribution; regional disparities
inertia, institutional 1456
informality 57, 58, 989, 205, 341, 371
settlements 81, 242, 243
taxation 199200
see also CDD; hard-to-tax; slums
infrastructure 25, 1245, 343, 345, 350
and decentralization 1212, 128, 13941
financing 105, 14260, 364
see also capital grants; maintenance expenditure
Ingram, Gregory 133, 158, 364
Inman, Robert 187
innovation 119, 212, 344, 360, 394
Inter-American Development Bank 327
intercept (of transfers) 150, 153
interest charges 256, 277
IRAP (regional business tax) 21718
Iregui, Ana 61
Israel 269
Istanbul 345, 360, 367, 380
Italy 209, 219, 257
Jacobs, Jane 345
Jakarta 10, 295, 367, 381
Jamaica 222, 238, 250, 251, 292, 391
Japan 186, 209, 218, 269, 291, 304, 356, 381
Jibao, Samuel 27
JNNURM (Jawaharlal Nehru National Renewal Mission) 106, 159, 381
Johannesburg 380
Jordan 237, 239, 244, 262
Joshi-Ghani, Abha 121, 384
Juul, K. 59
Kelly, Roy 248, 253
Kenya 79, 231, 245, 254, 257, 289, 292, 365
land value tax 2389, 253
local business tax 2089, 218
Kharas, Homi 414
King, David 190
KIS (keep it simple) principle 171
Klein, Michael 157
Kolkata 237, 355, 380
Korea 265, 269, 285, 304, 320, 347, 381
Kravchuk, Robert 12
Kurlyandskaya, Galina 320, 324
Kyrgyzstan 213
Kyriacou, Andreas 60
Lago-Peñas, Santiago 9, 56, 65
Lagos 215, 365
land adjustment 26870
land leases 266, 268
land sales 1489, 223, 266, 268, 342
land tax, see property tax
land titles 230
see also cadaster
land use, tax effects on 236, 237, 241, 272, 372, 379
land value tax 236, 2389
see also property tax; value capture
Lao PDR 10
Latin America 231, 233, 253, 314, 376
Latvia 291, 356
Lausanne 356
learning curve 213, 219, 220, 314, 322, 344
Letelier, Leonardo 49, 51
Levtchenkova, Sophia 328
Lewis, Arthur 11
Leviathan argument 57
Li, Bingqin 126
Liberia 253, 291
Libya 20
licenses 47, 148, 199, 208, 215, 218, 376
see also user charges
lifeline tariff 145, 171
Lin, Justin 55
Lindblom, Charles 139
linkage, rural areas 1756, 261
see also benefit principle; Wicksellian connection
Linn, Johannes 175, 290, 353, 414
Lithuania 250
Litvack, Jenny 21
Liu, Zhiqiang 55
loans, subsidized 281
see also borrowing
local business taxes 44, 200, 203, 2089, 218, 335, 367
see also business property tax; VAT
local economic development (LED) approach 69
local governments 32, 84, 186
budgets 1823
capacity 11, 245, 80, 97, 104, 129, 1378, 142, 213, 413
informational advantage 1045, 126, 127, 13031, 132, 199, 212
see also administration; budgeting; local taxes
local investment corporations 154, 159
local knowledge, see local governments
local taxes 184, 19091, 2049
see also property tax
Lockwood, Ben 60
lotteries 367
Lotz, Jorgen 200
Loyalka, Prashant 78
Lucknow 237
Lustig, Nora 347
Macedonia 256
Madrid 357, 390
maintenance expenditure 125, 130, 1337, 141, 142, 173, 315
malapportionment 349, 390
see also elections
Malawi 245
Malaysia 44, 237, 379
Manasan, Rosario 319, 325
mandates, expenditure 6, 87, 914, 134, 139, 226, 316
unfunded 6, 93, 115, 133, 312, 385, 401
Manila 355, 358, 370, 372, 380, 381
Manor, James 73, 97, 105, 1078
Maputo 250
Marcesse, Thibaud 108
marginal cost pricing 169, 378
market-preserving federalism 6
see also fiscal competition
Martinez-Vazquez, Jorge 49, 52, 55, 63, 100, 136, 147, 1767, 191, 231, 299, 304, 319
Mascagni, Giulia 9, 65
matching grant, see conditional grants
Mathur, Om 244, 253, 280, 289, 319, 325
Mauritius 277
Mauro, Paolo 29
Mbiti, Isaac 789
McCluskey, William 235, 251, 252, 255, 372
McLure, Charles 297, 310
McNab, Robert 55
measurement 37, 97
economies of scale 835
expenditure 3941
externalities 8081, 94
level of decentralization 4552
revenue 424, 257, 2589
Medellín 267
media, role of 34, 349
median voter 189
‘mega-cities’ 344
mergers, municipal 834, 387
Merk, Olav 158
metropolitan areas 28, 81, 85, 102, 176, 1889, 3429, 395
accountability 353, 363, 386
competition in 58, 104
government 82, 130, 134, 34951, 3589, 366, 402, 407, 415
one-tier 358, 387
reform 3839
self-financing 146, 195, 197
taxes 2049, 36678
transfers 37983
two-tier 351, 380
see also regional governments; special districts
Mexico 12, 20, 38, 88, 91, 116, 162, 201, 224, 250, 267, 307, 346, 355, 357, 359, 373, 380
payroll tax 202, 205, 371
tax sharing 291, 293, 298, 305
transfers 23, 89, 92, 134, 150, 162, 289, 295, 306, 312, 321
middle class 231, 233
migration, rural 103, 249, 314, 323, 337, 341, 3423, 345, 361, 389
Mohmand, Shandana 98
monitoring 110, 150, 245, 249, 25860, 263, 286, 316, 322, 32533, 40810, 417, 419
Montenegro 256
Montevideo 250
Montreal 390
Mookherjee, Dilip 29
moral hazard 125, 153, 155
motor vehicle taxes, see vehicle taxes
Mozambique 250
MTEF (medium-term expenditure framework) 11112
Mumbai 109, 136, 148, 206, 234, 237, 243, 245, 357, 358, 365, 369, 370
municipal development fund 151, 154
Musgrave, Richard 57, 170, 172, 175, 187
Myanmar 20
Nag, Tirthankar 59
Nagpur 237
Nairobi 254, 365
Namibia 238, 245, 262
nation-building 1722, 314
national priorities 91, 126, 173
national standards 82, 104, 312
natural resources 19, 20, 334, 337
revenues 67, 149, 194, 292, 299, 305, 30812
Nelson, M. 66
Nepal 10, 53, 197, 319
Netherlands 294, 354, 390
Netzer, Dick 173, 227
New York 186
New Zealand 238, 285
Neyapti, Bilin 55
Nigeria 19, 20, 215, 309, 314, 319, 325, 365
Nilekani, Nandan 96
non-residents, tax on 175
Nordic countries 192, 193, 200, 202, 371
norms, see expenditure needs; national standards
Norway 67, 149, 337, 356
Oates, Wallace 3, 9, 45, 57, 72, 188, 189
octroi, see India
OECD (Organisation for Economic Co-operation and Development) data 389, 41, 66, 67
OECD countries 40, 42, 57, 60, 121, 188, 191, 194, 195, 230, 253, 258, 285, 286, 345, 361
Olken, Benjamin 60, 61
option demand 175
Osborne, David 25
Oslo 356
Pakistan 43, 77, 205, 206, 237, 289, 293, 303, 319, 369, 377
expenditure assignment 1023
finance commission 33031, 409
property tax 244, 254
transfers 23, 289
Panama 161, 244, 246, 250, 253
panchayat, see India
Panizza, Ugo 49
Papua New Guinea 10, 310
parastatals 85, 132, 357
see also state-owned enterprises; utilities
Paris 354, 357
parking tax 377
participatory budgeting 118
patente208
see also local business taxes
paternalism 91, 92, 197, 315, 394, 414
Patna 218, 237
Paul, Samuel 96
payroll tax 175, 202, 203, 204, 205, 298, 368, 371
penalties 256
see also interest charges
Pennsylvania 236
performance grants 3212
personal income tax 202, 293, 298
Peru 14, 101, 122, 149, 214, 250, 292, 310
tax sharing 291, 311
Petchey, Jeffrey 328
Pethe, Abhay 160
Philippines 12, 16, 19, 20, 32, 64, 88, 91, 126, 129, 186, 205, 208, 225, 303, 319, 348, 351, 370
property tax 43, 248, 256
tax sharing 291, 2934
transfers 289, 314, 324, 325
see also Manila
piggybacking 192, 215, 218, 226, 299
pilot projects 114, 127, 161, 3845
Pirenne, Henri 345
Poland 231, 291
policing, see public security
political decentralization, see devolution
Pommerehne, Werner 49
Porto Alegre 252
Portugal 41
Pöschl, Caroline 18, 59, 126
poverty alleviation 624, 115, 362
presumptive taxes 215, 217, 227, 252, 260, 275, 298
see also property tax
Prichard, Wilson 27
principal–agent relationship 5, 171, 385
private schools 78, 225
privatization 157, 257, 294
see also contracting; public–private partnerships
procurement 141
professional tax 205
progressivity 229, 236, 240, 262, 301, 372
see also incidence; inequality; redistribution
Prohl, Silke 57
project cycle 136, 141
property tax 43, 147, 194, 244, 262, 275, 3714
administration 147, 215, 234, 24757, 373
administrative cost 238
area-based 45, 215, 218, 23940
assessment 229, 2379, 252, 253, 271
as benefit tax 228, 229
capping 275, 276
collection 2557
effective rate 2456
effort 52, 25
as excise tax 240
exemptions 229, 242, 2445, 271
government
as income tax 241
as presumptive tax 227, 238
progressivity 229, 236, 240, 262, 273
property 242, 245
rates 2457, 273
reform 228, 234, 247, 248, 255, 27075
revaluation 238, 2545
revenue potential 229, 23035
rural areas 241, 257, 25961
self-assessment 2489, 275
tax base 23545
tax roll 251, 254, 269
technology 2478
threshold 242, 275
unpopularity of 2278, 367
as user charge 173, 174
as wealth tax 218, 227, 241, 270
see also business property tax; cadaster; homeowner relief; valuation
property transfer tax 215, 228, 255, 2614, 373
Prud’homme, Remy 15, 29, 254, 395
public enterprises, see parastatals; state-owned enterprises
public financial management (PFM) 10814, 3623
public goods 168
public–private partnerships (PPPs) 135, 139, 15760, 161, 163
public security 77, 83, 116, 341, 391
Puga, Diego 341
Punjab 254
Qian, Yinyi 13, 300
‘race to the bottom’ 58, 202
rainy day fund 185, 187, 194
Rajaraman, Indira 260
random control trials 61, 69
Rao, Govinda 184, 268, 279, 320, 324
Razafimahefa, Ivohasina 61
redistribution 17071, 220
see also distributional goals; equalization; inequality; poverty alleviation
regional disparities 149, 203, 282, 285, 299, 301, 307, 310, 3225, 352, 354, 411
regional governments 222, 228
see also metropolitan areas
regional redistribution, see equalization
Regional Services Council levy 195, 295, 216, 370
registration tax 376
regressivity, see progressivity
regulation 214, 367, 376, 387
rent control 237
rental value, see property tax
representative tax system (RTS) 304
reserve funds 223
results-based grants, see performance grants
retaliation 201, 225
revaluation 253, 2545
revenue effort, see tax effort
revenue mobilization 1617, 197200, 219, 321, 323
revenue mobilization effect 280
revenue sharing 192, 288, 301, 30812
see also tax sharing
Rhoads, William 267
Ricardo, David 227
Riga 356
Rio de Janeiro 267, 276
risk bearing 1578, 310
road fund 148
roads 1312, 146, 374, 376
Roca-Sagalés, Oriol 60
Rodriguez, Edgard 62, 64
Rodrik, Dani 36
Romania 356, 371
Rome 219
rural local governments 289, 85, 1978, 130, 137, 141, 142, 195, 198, 31415, 344, 407
taxation 241, 257, 25961
Russia 8, 10, 18, 20, 44, 102, 105, 192, 217, 285, 290, 291, 294, 304, 320, 325, 396
Rwanda 205, 208
sales-assessment ratio 253, 271
sales tax 175, 36971
see also gross receipts tax; turnover tax
salience 198, 275
see also tax rate; visibility
Salmon, Pierre 56
Sánchez de Lozada, Gonzalo 411, 413
Sánchez Torres, Fabio 235, 254, 320
Santiago (Chile) 382
São Paulo 242, 268, 269, 299, 345, 355, 361, 380, 382
Saunoris, James 58
scale economies, see economies of scale
Schick, Alan 111
Schneider, Friedrich 57
secession 8, 2021, 48, 290, 309, 3457
second-generation theory 18990, 224
Self, Peter 355
self-assessment (self-declaration) 248, 249, 275
Senegal 59, 231, 237, 262, 325
separatism, see secession
Sepulveda, Cristian 49, 63
Serbia 244
services, taxes on 206, 3678, 369
shadow economy 578
see also informality
Shah, Anwar 50, 55, 59, 86, 328, 380
Shanghai 380
Shoup, Carl 84
Siemiatycki, Matti 158
Sierra Leone 27, 66, 219, 224, 253, 278, 392
Singapore 223, 376
Singh, Nirvakar 279
Slack, Enid 236, 274
Slovenia 244
slums 151, 260, 350, 361, 3645, 384
see also informality
small business 200
see also licenses; local business tax
Smoke, Paul 99, 341
Smolka, Martim 243
social capital 61, 190, 257
see also trust
social investment fund 154
Sofia 356
soft budget constraint 24, 153, 155, 177, 1824
see also budget constraint; fiscal mischief
Sokoloff, Kenneth 51, 78
Somalia 20, 238
Sorens, Jason 20
South Africa 8, 12, 17, 27, 154, 204, 206, 209, 218, 290, 303, 373, 396, 406, 4078, 417
equitable share 295, 325
finance commission 331, 332
metropolitan areas 345, 348, 359, 380, 386
property tax 253, 254, 257
Regional Services Council levy 195, 205, 216, 370
see also Cape Town
Soviet bloc, see transition countries
Sow, Moussé 61
Spain 52, 193, 222, 347, 357, 390
special district 82, 129, 132, 139, 142, 160, 180, 354, 355, 385, 387, 402
spillovers 812, 137, 176, 188, 222, 285, 352
see also externalities
Spratt, Stephen 145
Sri Lanka 17
stabilization policy 234, 1934, 220, 221, 310, 411
stamp duty 251, 261
state finance commissions, see India
state-owned enterprises 132, 182, 350, 355, 388
see also parastatals; utilities
Stein, Ernesto 57
Stockholm 354, 356
Stren, Richard 87
sub-municipalities 129
subnational taxes 2049
see also local taxes
subsidiarity principle 117
subsidy policies 106, 109, 379
see also lifeline tariff; user charges
Sudan 20, 917
‘sunset’ rule 93, 245, 273, 332, 419
‘sunshine’ rule 93
see also transparency
surveys 129, 213
Sverrisson, Alan 63
Sweden 218, 354, 356
Switzerland 60, 193, 200, 202, 225, 356, 378
Syria 20
Tanzania 95, 205, 208, 242, 289, 295
Tanzi, Vito 29, 395
tax administration 27, 21119, 335
see also tax technology
tax assignment 172, 175, 18795
tax base sharing, see crowding out; fiscal competition; fiscal externalities; piggybacking
tax cascading 207, 366
tax clearance certificate 256
tax competition, see fiscal competition; fiscal externalities
tax decentralization 512, 1968, 209, 21119, 286
tax effort 203, 235, 282, 284, 285, 287, 319, 320, 323
tax exporting 169, 173, 175, 190, 201, 366
tax incentives 292, 300, 384
tax price 97, 284, 299, 306, 388
tax rates 1912, 2457, 273, 277
limits on 201, 211, 259
see also salience; visibility
tax roll, see property tax
tax room 213
tax segmentation 226
tax sharing 149, 218, 289, 2914, 295, 2968, 320, 395
see also revenue sharing
tax technology 211, 21415, 227, 247, 253, 263, 376
taxing power 16, 21, 44, 52, 97, 144, 180, 184, 187, 192
limits on 6, 201, 319, 397
Taylor, Zachary 97
technical assistance, see expert capture; foreign aid
Ter-Minassian, Teresa 156
Thailand 87, 231, 295, 360, 380, 387
third-party information 252, 263
Thirsk, Wayne 304
threshold, tax 200
Tiebout, Charles 58, 168
Timofeev, Andrey 100
tolls, road 373
Toronto 352, 359, 390
Tosun, Mehmet 55
trade taxes 202, 217
transfers, fiscal 23, 92, 112, 134, 15052, 162, 176, 223, 279, 281, 312, 314, 349, 37983, 403
dependence 1956
derivation approach 296, 298301
distributable pool 301, 322, 329
distribution formula 289, 290, 295
effects 31825
equalization 144, 2857, 3225
externalities 283, 2878
formula grants 23, 150, 3016
importance 28082
rationales 28290, 302
and revenue 31922
see also equalization; expenditure need; fiscal capacity
transit, public 109, 124, 127, 158, 159, 352, 356
transitional countries 12, 19, 20, 185, 192, 201, 23940, 289, 299, 371
transparency 93, 96, 11213, 118, 191, 255, 296, 3012, 335
see also accountability
Treisman, Daniel 9, 32, 60, 64
Trinidad 237
trust 92, 111, 134, 160, 190, 246, 363
see also social capital
Turkey 20, 53, 148, 345, 360, 367, 380
turnover tax 195, 202, 298
see also gross receipts tax; sales tax
two-tier government, see metropolitan areas
Uganda 17, 78, 95, 96
decentralization in 27, 92, 396, 409
graduated personal tax 194, 205
Ukraine 93, 304
UN Millennium goals 364
unbundling 101, 132, 1356
see also expenditure assignment; PPPs
UNCDF 321
unconditional grants 150, 337
see also transfers
underutilized land, see land use
unearned increment 236, 265, 266
see also value capture
unfunded liabilities 182, 184
unfunded mandates, see mandates
United States 42, 52, 79, 186, 192, 193, 201, 202, 222, 236, 238, 260, 354
urban fringe 260
Uruguay 250, 260
USAID 411
user charges (fees) 29, 467, 67, 81, 106, 108, 141, 143, 1446, 169, 334, 356, 3789, 402
see also licenses; utilities
utilities 47, 67, 106, 160, 1756
see also parastatals; state-owned enterprises
Uttar Pradesh 331
vacant land tax, see land use
Vaillancourt, François 294
valorization 265
valuation, of property 2525
valuation-driven reform 2712
value capture 147, 174, 228, 2649, 342, 372
Vancouver 357
VAT (value added tax) 193, 195, 200, 213, 216, 218, 254, 2634, 291, 292, 296, 297, 300301, 335, 36970
as local business tax 209, 21011, 367, 291
vehicle taxes 148, 2067, 3748
see also fuel tax
Venables, Anthony 364
Venezuela 256
vertical balance (imbalance) 51, 184, 187, 282, 2834
see also fiscal gap
vertical programs 51, 141, 31316
vertical share 280, 288, 290, 2916, 329
Vickrey, William 173, 377
Vietnam 20, 91, 161, 197, 285, 319, 324
Vinuela, Lorena 121
visibility of taxes 191, 227, 234, 402
see also salience; tax rate
Von Braun, J. 63
Wallace, Sally 49, 229
water 82, 86, 945, 101, 12930, 145, 146, 315
subsidies 109, 379
wealth 230, 262, 270
see also property tax
Weingast, Barry 13, 45, 300
West Bengal 259, 314
Wetzel, Deborah 102
Wicksellian connection 1727
see also benefit model; linkage
Widodo, Joko 349
willingness to pay 197, 199
Winer, Stanley 152
World Bank 7, 17, 18, 39, 59, 66, 67, 97, 99, 115, 158, 161, 327, 384, 395, 411
World Values Survey 61
Yao, Guevara 63
Yao, Ming-Hung 57
yardstick competition 45, 58, 126
see also benchmarking
Yatta, François 294
Yeltsin, Boris 349
Yilmaz, Serdar 55
Zagreb 356, 371
Zambia 78
Zhang, Henglan 126
Zhang, Tao 55
Zhang, Yongmei 126
Zhang, Zhihua 299
Zolt, Eric 51, 78
zoning 264, 267
Zou, Heng-fu 55