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2. New stage of reforms in SEE. Comprehensive reform programs:Decentralization strategies: Albania (2000), Bulgaria (2002-2005), Political programs, external pressure: Macedonia: Ohrid Agreement (2002-2004), national tax reform (BiH, Serbia)Gradual, technical reforms: Croatia (2001), Serbia (2004-2006), Montenegro (2004), Romania.
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1. Fiscal Decentralization Initiative (FDI)
Regional rapporteurs:
Tony Levitas (anthony_levitas@dai.com)
Gábor Péteri (gpeteri@lgidev.com)
2. 2
3. 3 Increased international assistance Long term USAID funded projects: Albania (Urban Institute); Bulgaria (RTI); Macedonia, Serbia, BiH (Dai Inc.); Montenegro (ICMA, Urban Institute)
Council of Europe activities: Stability Pact Conference (Zagreb, 2004); recommendations, “opinions”
International organizations: UNDP (e.g. HD or Blue Ribbon Commission Reports); European Union (EAR, CARDS); OSI (LGI, National Foundations)
Bilateral programs: DfID, GTZ, SIDA, Netherland, new EU states
4. 4 What has been achieved? Devolution of government functions
Administrative structures
Own revenue raising
Intergovernmental transfers
Local administrative and management capacity
5. 5 1. Scale of decentralization Modest measurable results:
Local budgets: 5-7% of GDP; 13-20% of GGE
Separation of devolved (own, optional) and delegated (mandatory) functions
Limited impact on sectoral reforms:
Property transfer is postponed
Administration, supervision is centralized
Ministry functions are slowly changing
Lacking capital investment funding
6. 6 2. Structural reforms One tier systems: BG, MAC, MNE, SRB
Separation: MNE (new country), BiH (fragmented), SRB (diminishing provincial level)
Regional planning, development: BG, RO, CRO
Large city financing reforms: Skopje, Beograd, Sarajevo
7. 7 3. Own source revenues Diverse municipal revenue base:
Property tax is widely known, but underused
Traditional land use & development fee, communal charge in ex-YU
PIT surcharge: CRO, MNE
Limited autonomy: BG, BiH, MD
New rules of revenue sharing after VAT
Limited borrowing, unsolved problems of inherited debt (MAC)
8. 8 4. Intergovernmental transfers Scope: Attached to tax (BiH, MAC); % of GDP (SRB), Solidarity Funds (MD) => stabilize
Incentives created locally:
Gap filling: MD, BG (labor), CRO
2. General grant: ALB, CRO (in areas of special state concern), MAC, SRB
3. Standardized method on the revenue side: Albania, Serbia
9. 9 4. Intergovernmental transfers, cont. Formula based equalization grant schemes:
Focusing on shared revenues (VAT, business tax)
Scope: 15-30% of local revenues
Expenditure side: formula driven (population, area, length of road)
Revenue side: +% of per capita revenues
10. 10 4. Intergovernmental transfers, cont. Management:
Gradual phasing in (BiH: 6 years, CRO: experiment with 32 cities)
Lack of data (ALB: area)
Transparency:
Legislated in LG Finance Laws
Grants Commission (SRB, MAC, MNE)
Increased role of Associations
11. 11 Civil service training:
Institutes of Public Administration (e.g. RO, KIPA)
Local Democracy Academy: CRO
Associations:
diverse influence (SRB <-> CRO)
professional associations: finances (MAC), water (MNE, SRB), communal
International, regional cooperation: NALAS
12. 12 5. Local capacity, cont. Financial management:
Computerized financial reporting (SRB, MAC, BiH);
Asset management
One-stop-shop, customer services
13. 13 Issues of fiscal decentralization Reform of human/social services (further decentralization)
Structural reforms: regional and sub-municipality self-governments, minorities
Incentives created by transfers
Dealing with the private sector (PPP, LED)
Capital investment financing
Revenue administration capacity
Financial management: fiscal information, budgeting/reporting, audit, openness
14. 14 Proposed further FDI activities Country specific actions (EU, new countries)
Monitoring law enforcement, regular assessment of decentralization
Horizontal exchange of professional experiences, network of policy designers
Improving policy development (process, capacity at top level)
Benchmarking local government financial management and performance