THREADING THE FISCAL LABYRINTH - SOME ISSUES IN FISCAL DECENTRALIZATION

Fiscal decentralization in many guises has become a central concern ar ound the world. This paper discusses several aspects of this complex s ubject that have turned out to be important in policy work on the issu e in a number of countries. First, I discuss briefly the meaning and r ationale of fiscal decentralization. There is much that has to be dise ntangled before one can approach the issue in a particular policy sett ing, including distinguishing between the problems of federal finance and fiscal federalism. Second, I review the issue of the choice of loc al revenue sources from the perspective of establishing efficient loca l governments, including the roles of user charges, property taxes, an d income taxes. Finally, I sketch some considerations with respect to the design of intergovernmental transfers from the same perspective, w ith particular emphasis on the desirability in many settings of transf ers that are both conditional and equalizing.