Reforming serbias local government finance system
By: LEVITAS, Anthony
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Approximately 30 percent of all local government revenues in Serbia come from shared sales taxes. In the immediate future, the Government will have to replace sales taxes with a value added tax in order to meet EU norms. This will require a fundamental overhaul of Serbias intergovernmental finance system because unlike sales tax, the VAT cannot be shared on an origin basis. This paper outlines the origins of Serbias current intergovernmental finance system, summarizes its strengths and weaknesses, and then, in light of the necessity of change, sketches a set of reform proposals. These include creating a formula-based equalization grant funded by a fixed percentage of national budget revenues; introducing the legal possibility for block grants, categorical grants, and grants for delegated functions to fund the devolution of new responsibilities to local governments and to support specific (investment) programs; and restoring local government control over Serbias ad valorem property tax.
Volume 28
Numbers 1-2
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