0w2010 01 RESUM EJECUTIVO 03 DEFcarta ang
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Second Global Report on Decentralization and Local Democracy. GOLD 2010 EXECUTIVE SUMMARY
When unfunded, such intergovernmental cost shifting should be banned. Demand for local services, including the provision of selected old age-related care, and community and social services, is rising in Europe. This trend is particularly challenging in countries facing difficulties arising from a rapidly ageing population and the need to absorb and integrate immigrants. Therefore, coordination needs to be boosted among the different levels of government to devise workable, cost-effective solutions to these problems that would take into account local government expertise in service delivery and their ability to extract information of residents’ preferences and needs. At the EU level, efforts to expand the internal market need to take local choice into account. The provision of public services has come under increasing scrutiny from the European authorities as they seek to expand the European internal market.5 Tensions have therefore often arisen with sub-national governments in matters that they perceive as within the remit of their self-government prerogatives. A European Charter on Local and Regional Services of General Interest was proposed in 2009 to deal with this matter. Against this background, effort should be stepped up to reconcile initiatives towards building an internal market with the need to preserve local preferences and choice. With regard to own revenue sources, there is a lot of diversity among European local governments on the mix of tax instruments available to local governments. Immobile taxes, such as those on property, are the ideal sources of revenue for local governments. In addition, the experience of several countries suggests that, while the personal income tax works quite well as a local tax or when its revenue is shared
between different levels of government, the corporate income tax is best managed by the central government. There may be scope for raising local revenue through user charges and fees for services, but concern that co-payments may hinder access by selected social groups to local services has often discouraged local governments from levying charges and fees for services. While recognizing the constraints imposed by specific country environments, local authorities should continue to evaluate the costs and benefits of user charges in their efforts to raise revenue. There is scope for improving the design of fiscal rules for local governments. Rules that restrict local government access to credit markets may encourage local governments to rely only on bank lending as a source of finance or to look for ingenious mechanisms for bypassing restrictions on debt issuance. In this case, consideration could be given to the option of replacing such restrictions by more comprehensive prudential regulations based on debt repayment capacity that do not distort policymakers’ choice over financial instruments. Borrowing constraints or balanced budget provisions make it difficult for local governments to smooth the budgetary impact of fluctuations in the business cycle. This is especially the case of local authorities that rely of cyclical revenue, through own collections or sharing arrangements with higher levels of government. In this case, balanced budget provisions could be redefined on a cyclically adjusted basis, so long as local governments have access to budget financing from non-government sources in bad times and instruments to save cyclical revenue windfalls in good times.
5. Public services, including those that affect individual citizens’ quality of life, sustainable economic development or social/regional cohesion, are known in EU jargon as Services of General Interest (SGIs) or Services of General Economic Interest (SGEIs).