Figure 3. Sub-national expenditure (regions and municipalities) as % of national GDP.
Sub-national expenditure as % of total GDP 0% - 5% (lowest: GTM<1%) 6% - 10% 10% - 20% >21% (highest: DNK 36.4%) Information not available
Source: OECD and UCLG (2016) Subnational Governments around the World – Structure and Finance
Even LRGs in middle- (e.g., Argentina, Chile, El Salvador) and high-income countries warn about a system of local finances that does not allow them to fulfil their tasks and responsibilities. The Dutch Association of Municipalities, for example, explains that the “central funding system in the Dutch governance model does not do justice to the vastly expanded tasks and powers at the provincial and municipal levels”. LRGs have been asking ask for broader tax jurisdiction, financial leeway and a stronger collaboration at state level with investment partners through favourable legislation and regulations. Unless serious reform is undertaken, it will be difficult for many sub-national governments in developing countries, and even more so in low-income countries, to ever take part in the process of SDG localization. In this regard, four recommendations should be taken into consideration: • Enhance local revenues generation. In many countries, sub-national governments can raise a reasonable share of the resources they spend, thus reducing pressure on national budgets. Recent local taxation reforms implemented in some of the countries analyzed in this report, such as Addis Ababa (Ethiopia), Kampala (Uganda) and Lagos (Nigeria), have shown positive results in public financial capacities when strengthened through improved management of local taxes and capture of land added-value.85 This explains why LRGs need fair fiscal reforms that enhance local fiscal bases and powers for sub-national governments, while supporting the ability of local governments to collect taxes.
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85 UNCDF and UNDESA (2017) Financing Sustainable Urban Development in least developed countries, available online at this address: http://www.uncdf.org/financing-sustainable-urban-development-in-the-least-developed-countries.