Local Government and Fiscal Transfers

Inhaltsverzeichnis

1. Frontmatter

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2. Chapter 1. Introduction: Impact of Fiscal Transfers on Local Democracy

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   Juraj Nemec, Michal Plaček, Purshottama Sivanarain Reddy

   Abstract

   Over the years, we can observe a dynamic development of fiscal federalism theories. The original theories were concerned with the optimal distribution of revenues and expenditures between local and central governments. Contemporary theories focus not only on the problem of optimal resource allocation and provision of public services but also look at the broader social impact, e.g. on minorities, democracy, participation, and the like.

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3. Chapter 2. Albania

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   Besa Shahini

   Abstract

   This chapter describes the operations of local governments in Albania following the 2015 territorial reform. It details the legal framework and decentralization drive. It shows how municipalities are financed through three pillars: unconditional and sectoral transfers, shared taxes, and own revenues from local taxes and fees. Expenditure trends are shown in terms of personnel, operations, and capital expenditure. The topic of the chapter is the 2019 launch of sectoral non-conditional transfers and the redistribution formula to balance fiscal capacity. Two brief case studies outline the key risks. First, a vertical fiscal imbalance: most municipalities lack the capacity to cost, and fund assigned functions, particularly small ones. Second, central transfers, arrears clearance, the Regional Development Fund, and earthquake reconstruction political and transparency issues, the latter normally sensitive to electoral cycles. Albania has made progress on local autonomy, but still there are present the gaps. Better cost accounting, more predictable transfer rules, and safeguards against politicized allocation are needed to strengthen local democracy and service delivery.

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4. Chapter 3. Czech Republic

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   Lucie Sedmihradská, Ondřej Kuba

   Abstract

   This chapter examines the fiscal and governance structure of municipalities in the Czech Republic, a highly fragmented country with over 6,250 municipalities. It outlines the evolution of local government since 1990 and the dual nature of municipal responsibilities—independent and delegated. The analysis focuses on municipal revenue sources, including shared taxes, local taxes, and transfers, highlighting limited fiscal autonomy due to the tax-sharing mechanism. Using the LoGICA Framework and Local Autonomy Index, the chapter evaluates multilevel governance and presents a case study on the link between fiscal autonomy and electoral competition. Findings show that municipalities with uncontested elections rely more on transfers, indicating lower autonomy and reduced democratic accountability. Despite legal and institutional independence, Czech municipalities face weak incentives for economic development.

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5. Chapter 4. India

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   Amitava Basu

   Abstract

   India, a socialist, secular republic in South Asia, extends from the snow-covered Himalayas in the north to the tropical rain forests in the south and tapers off into the Indian Ocean between the Bay of Bengal on the east and the Arabian Sea on the west. It spreads over 3.28 million square kilometres and is the 7th largest country in the world, consisting of 28 provinces or states and 8 union territories administered by the national government. The country houses over 1.45 billion people from diverse cultures, traditions, and religions. India has a federal framework with parliamentary democracy. It has a three-tier government—the national or the central government, the provincial or the state government, and the local government at the village and town level.

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6. Chapter 5. Indonesia

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   Irwanda Wisnu Wardhana, Amrie Firmansyah

   Abstract

   As of 2025, Indonesia is the world’s largest archipelagic nation, with 17,000 islands, comprising 38 provinces led by governors, 416 regencies led by regents, and 98 cities led by mayors (Statistics Indonesia, 2025). Both regents and mayors have equal status as the second local government level after governors. Additionally, there are over 84,000 villages called desa in rural areas and kelurahan in urban areas.

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7. Chapter 6. Japan

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   Tatsuro Niikawa

   Abstract

   Japan is an archipelagic state with an area of 370,000 sq km and a population of 124 million in 2023 (Statistics Bureau of Japan, 2024). Japan is a constitutional monarchy, and a centralised (unitary) state restored to a democratic political system in 1947 following the defeat in the Pacific War in 1945.

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8. Chapter 7. Lithuania

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   Andrius Puksas

   Abstract

   After the administrative reform, which took place nearly a quarter of a century ago, Lithuania comprises 60 municipalities, as defined in the Law on the Territorial Administrative Units and Their Boundaries of the Republic of Lithuania (1994). The population of the country is approximately 2.9 million. The average Lithuanian municipality has an area of approximately 1,200 square kilometers (total area is approximately 65,300 square kilometers).

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9. Chapter 8. Philippines

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   Philip Arnold P. Tuaño, Ronald U. Mendoza, Tristan Canare, Satyabhama Andrea C. Gulapa

   Abstract

   The chapter analyzes the impact of fiscal transfers on local democracy in the Philippines, focusing on the interplay between decentralization, autonomy, and dependence. It analyzes how intergovernmental transfers have shaped local government units’ (LGUs) capacity to deliver services, raise revenues, and exercise policy discretion. While increased transfers have significantly expanded LGUs’ fiscal space and the potential to address local priority needs, many of them still remain highly dependent on national funds, constrained by their limited ability to generate revenue. The chapter highlights the political dynamics surrounding fiscal transfers, including risks of patronage, fiscal dependency, and the “flypaper effect,” where LGUs spend more of the transfers rather than mobilize their own resources. While fiscal transfers are essential for equity and local development, the local governments’ ability to strengthen local democracy depends on capacity-building, stronger accountability mechanisms, and enhanced fiscal autonomy.

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10. Chapter 9. Slovak Republic

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    Beáta Mikušová Meričková, Nikoleta Jakuš Muthová, Janka Holíková

    Abstract

    Slovakia is a small country in the middle of Europe, a member of the European Union since 2004. It is one of the most fragmented countries in Europe, with almost 3,000 municipalities and a population of 5.5 million. The average Slovak local government—the municipality has an area of approximately 17 square kilometres. Only two cities, Bratislava and Košice, have more than 100,000 inhabitants (approximately 430,000 in Bratislava and 250,000 in Košice).

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11. Chapter 10. South Africa

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    Ajiv Maharaj, Purshottama Sivanarain Reddy

    Abstract

    South Africa forms the southern basin of Africa, with a roughly V-shaped coastline which stretches for about 2,798 kilometres. The east coast of the country fronts onto the warm Indian Ocean, while the west coast fronts onto the colder South Atlantic Ocean, with the two oceans meeting at the southernmost tip of Africa known as Cape Agulhas. In addition, just outside the boundaries of the country are eSwatini (Swaziland) and Lesotho, two landlocked independent states (Republic of South Africa, 2022).

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12. Chapter 11. Sweden

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    Iwona Sobis

    Abstract

    Sweden is a unitary state, constitutional monarchy, and parliamentary democracy. The country has a Nordic welfare system that provides universal access to healthcare and higher education for its citizens. Sweden has one of the highest GDP per capita rates globally, ranking 12th overall. The country also ranks highly in quality of life, health, education, economic competitiveness, income equality, gender equality, and human development.

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13. Chapter 12. Uganda

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    John-Mary Kauzya

    Abstract

    Uganda is an East African country that gained independence from the British in October 1962. It was ruled by highly centralised and dictatorial governments, including military governments, until around 1992, when a decentralisation policy was implemented. Later, it was given a legal and constitutional foundation, which made decentralisation and local governance an important feature of Uganda’s governance system.

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14. Chapter 13. Transfers and Local Democracy: A Comparative Global Perspective

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    Juraj Nemec, Michal Plaček, Purshottama Sivanarain Reddy

    Abstract

    This book aims to document, through the selected national case studies, how fiscal transfers to local governments impact local democracy. The eleven country chapters selected and highlighted in the book explore the global effects of transfers in different political and institutional contexts. It also serves as a critique and provides a valuable source of information on different forms of impacts of transfers from higher levels of government to local self-government and ultimately on local democracy internationally.

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15. Backmatter

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