Participation of Citizens in Public Financial Decision-Making in Serbia

Participation in the local public finance decision-making process in Serbia is not a new concept as it was implemented even during the ‘Titoistic’ period. However, direct participation is still in an infant phase altogether with the low interest of citizens in participating in local financial decision-making procedures. The aim of this paper is to explain the main types of civic participation in the local financial decision-making process (i.e., referendum voting on self-imposed contribution, participatory budgeting, and civic crowdfunding) and to focus on the main factors that lead to a low participation of citizens in such processes. Additionally, the article analyses how these factors affect general mistrust in politics and society. For this purpose, a total of N=421 citizens were interviewed. Using the principal component analysis, the following three main components for low participation were defined: 1) lack of knowledge, 2) lack of interest, and 3) lack of political will. Thereafter, using the regression analysis, the study confirmed that the first two components are statistically significant predictors for mistrust in politics and society.

Sustainable Land Planning in Case of Decentralized Land Authorities

The main focus of this paper is to analyze the effect of local public finance on spatial land use through economic models and empirical evidence from Israel. The theoretic models extends the Alonso-Mill-Muth model by incorporating local public finance. The first finding is that steady population growth provides a channel for land capitalization through the mechanism of long term land property right. This implies a possible conflict of interest if ownership of land leasing revenue and the ad valorem property tax are not consistent. The empirical section examines one of the implications derived from the models highlighting a possible inconsistency between central and local governments due to land ownership centralization. This causes local tax revenue inequality among Israeli municipalities. Statistical evidence shows that cities with a larger share business land use can generate more tax without assistance from the central government, and are therefore more fiscal independent. Fiscal status has a significant effect on the planning time of residential construction. Municipalities with higher local tax revenues have shorter planning time(higher probability of acceptance) conditional on the plan’s size and other features.

Real Property Tax in Local Public Finance

The real property tax (RPT) is a major, stable revenue source for local governments to provide basic public services. The quality, quantity and reliability of public services in a locality are key indicators of the living standards. The service responsibilities require local governments to maintain stable revenues. RPT is a tax on owning and holding land and structures on land, and RPT is a very old tax, dating back to ancient times when land and products thereof were the most important assets. RPT has been used by governments of all countries throughout history, although with huge variation in formats and ways of use. Despite numerous pitfalls in its design and administration, RPT has remained a pillar of local revenue, accounting for a high percentage of total local revenue. Thus, it is important to understand RPT and its roles in local public finance. RPT was mistakenly dubbed the worst tax, a misnomer that has caused misperception of the tax that should be corrected. RPT is one essential pillar of a modern tax system. The design and maintenance of an optimal RPT should follow six principles. The complexity of RPT is with key aspects in its administration, with the weakest link in property value assessment. Exemptions and limitations add to the complexity of RPT, causing unintended consequences. From a panoramic view, RPT has adapted to changes of the society and economy; it still holds prospects as an optimal tax and remains the cornerstone of accountable and sustainable local public finance.

Book review: Harry Kitchen, Melville McMillan and Anwar Shah, Local Public Finance and Economics: An International Perspective

Harry Kitchen, Melville McMillan and Anwar Shah, Local Public Finance and Economics: An International Perspective. Palgrave Macmillan, 2019. 521 pp., ₹8,977.50.