0w2010 01 RESUM EJECUTIVO 03 DEFcarta ang
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Second Global Report on Decentralization and Local Democracy. GOLD 2010 EXECUTIVE SUMMARY
government finances about 70 percent of all metropolitan government revenues from local taxes. Toronto has a more traditional financing structure for a local government, and relies on the property tax and user charges to cover about 60 percent of its budget. Metropolitan cities in some developed countries finance local public services with non property taxes. Metropolitan local governments in the Nordic countries and Spain rely primarily on individual income taxes, and New York City makes heavy use from a combination of retail sales tax, personal and corporate income taxes, and business taxes. Stockholm’s local governments cover about 80 percent of their expenditures from local sources, primarily from an earned income tax. In Paris, the principal local tax is a business tax. Metropolitan local governments in some developed countries do not have significant taxing powers. The Greater London Authority receives most of its revenues from central government grants. The Stuttgart Regional Authority has no taxing authority. The Greater Vancouver Regional District is financed primarily by user fees and intergovernmental transfers.
Developing Countries In practice, large urban governments in most developing countries do not rely greatly on local taxation. Despite the arguments that local governments in metropolitan areas could feasibly handle a greater range of taxes, most are limited to property taxes and user charges as the main sources of revenue. There are, however, some exceptions to this general pattern. Additionally, there are good reasons why local government taxation is less used by developing countries. First, in most cases, expenditure regimes are centralized, so there is less demand for own source revenues. Second, local tax administrations are often thought to be less
efficient than central tax administrations, and this justifies a heavier use of intergovernmental transfers to finance subnational government services. Finally, the revenue sources available to subnational governments are often restricted by country tradition or in some cases by the constitution.
Conclusions Is there a next step in improving and rationalizing the financing of large cities in metropolitan areas? Three policy directions seem to stay in the public discussion and would seem worth consideration.
Governance It may be time to move away from the academic advice that general purpose local government is the answer to the public financing problems in metropolitan areas. Home rule is too firmly entrenched to be dismissed, at least in the foreseeable future. Such a shift in emphasis would take public policy toward emphasizing a two-tier metropolitan structure overlaid by a capital infrastructure district(s) for services that lend themselves to pricing and a regional coordination and planning district. Attention could then shift to designing a system of taxing and charging that would best fit two-tier governance. How would this differ from the present system? First, the regional districts would be elected and viewed as much as financing districts as service delivery areas. To make this happen however, enabling legislation by higher level governments would be required. Second, the taxation instruments used by the lower tier governments would be designed to fit the basic efficiency rules of taxation, e.g., no tax exporting. Third, higher level governments would ensure a better match between expenditure assignment and revenue assignment. This would require important changes– more clarity and fewer mandates– on the expenditure side and on the
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