Assessing the 2019 Redesign of Bulgarian Fiscal Equalization System

In many countries the narrowing of horizontal fiscal imbalance at local government level is an important issue of national fiscal policy. Large fiscal disparities at municipal level could lead either to lower service levels in fiscally poor regions or to higher tax rates for similar service levels in these regions. In turn, this could thwart efforts to reduce inequality in income distribution between individuals or could induce fiscally inefficient migration of business and individuals. Since the launch of fiscal decentralization reforms in Bulgaria in 2003 part of central government grants system for municipalities has been the equalization grant aimed at financing a minimum level of local services delivery. The equalization formula has undergone many changes during the years, and the last one was implemented in 2019. The main focus of the current study is to compare the equalizing effect of the equalization schemes applied in Bulgaria in 2018 and 2019. In order to test whether the 2018 and 2019 distribution formulas carry an equalizing effect with respect to municipal expenditure needs, per capita transfers received is regressed on three variables or indicators reflecting the differences in the municipal expenditure needs. Our results show that the new equalization mechanism as of 2019 is better designed to capture the differences in municipal expenditure needs and to alleviate fiscal disparities at local level when compared to the mechanism applied in 2018.

An Analysis of Equalizing Capacity of State Transfers for Local Government Activities in Bulgaria

The aim of this paper is to examine the fiscal disparities among local governments in Bulgaria and to show the capabilities of the existing intergovernmental transfer system to reduce them. Fiscal equalization policy in Bulgaria is performed through a general equalization transfer for local activities the distribution of which is based on local government tax revenue, as well as on service delivery costs. We measured the extent of equalization in three years – 2007, 2011 and 2017, during which the equalization transfer formula underwent considerable changes. For 365 municipalities we found out that, although the applied equalization mechanisms reduced the inequality in municipal own-source revenuе the remaining fiscal disparities among local governments were still considerable. Our research also suggests that disparity-reducing strength of the general equalization transfer remained almost unchanged during the period under review with its equalizing potential hampered to a great extent by the inclusion of additional compensatory elements in the distribution formula.

Analyzing the determinant variables on the difficulty of transfer power of rural and urban property tax from central to regional government in Indonesia

Motivated by rapid development of local autonomy and fiscal decentralization in Indonesia, this study aims to analyze determinant variables that causing the difficulty in the transfer policy of Rural and Urban Property Tax from central to regional governments. This program was designed to mitigate the fiscal disparities and revenue inequality among local authorities, also to increase the local people welfare. To comply with Government Law Number 28/2010 on Regional Tax and Levy, government transfers the right and authority of Rural and Urban Property Tax from central into regional government since 1 January 2011. By 31 December 2012, only 18 regional authorities have undergone the program and the rest seems to be having some difficulties. The study adopted a constructivism approach with qualitative method. The results show some determinant variables that causing the difficulties on this policy: (1) the weakness of bureaucratic attitude adhering to local government; (2) central and regional government are still not on the same page on collecting fee for Rural and Urban Property Tax; (3) the unclear formulation on fee collection of Rural and Urban Property Tax; (4) the lack of competency in the local government and short of experiences in Rural and Urban Property Tax collection.

From Urban Core to Wealthy Towns

Fiscal disparities occur when economic resources and public service needs are not evenly distributed across localities. There are equity concerns associated with fiscal disparities. Using a cost-capacity gap framework and a newly assembled data set, this article is the first study to quantify nonschool fiscal disparities across Connecticut municipalities. It finds significant nonschool fiscal disparities, driven primarily by the uneven distribution of the property tax base while cost differentials also play an important role. State nonschool grants are found to have a relatively small effect in offsetting municipal fiscal disparities. Unlike previous research focused on a single state, this article also conducts a cross-state comparison. It finds that nonschool fiscal disparities in Connecticut are more severe than those in Massachusetts, and nonschool grants in Connecticut are less equalizing than those in Massachusetts. This article’s conceptual framework and empirical approach are generalizable to other states and other countries.