ISP Working Paper Number 99-1

Implementation Rules For Fiscal Decentralization (100 KB)

by Roy Bahl, January 1999

Note:

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Summary:
Rule #1
Fiscal decentralization should be viewed as a comprehensive system

Rule #2
Finance follows function

Rule #3
There must be a strong central ability to monitor and evaluate decentralization

Rule #4
One intergovernmental system does not fit the urban and the rural sector

Rule #5
Fiscal decentralization requires significant local government taxing powers

Rule #6
Central governments must keep the fiscal decentralization rules that they make

Rule #7
Keep it simple

Rule #8
The design of the intergovernmental transfer system should match the objectives of the decentralization reform

Rule #9
Fiscal decentralization should consider all three levels of government

Rule #10
Impose a hard budget constraint

Rule #11
Recognize that intergovernmental systems are always in transition and plan for this

Rule #12
There must be a champion for fiscal decentralization