The outlook for the finances of local authorities in France

Emmanuelle Taugourdeau and Juliette Kies
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Juliette Kies: CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique

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Abstract: The decentralisation process begun in the 1980s has regularly broadened the scope of local authorities' responsibilities, and therefore their expenses. Meanwhile, their financial situation has deteriorated, deepening the inequalities between territories. Is this trajectory in local public finances still tenable ? At present, this question is a burning issue, especially since President Emmanuel Macron announced the abolition of the residence tax, bringing budget balancing difficulties of local authorities to the forefront. This brief presents an overview of the finances of local authorities and the basic principles of local taxation, in order to examine the issues around equality between territories in the future. Externalities, horizontal and vertical tax competition, budgetary discipline and equalisation mechanisms are all key components in analysing the current situation in France. However, in a period of decentralisation, which equals territorial autonomy, local taxation is not enough to offset the profound disparity between communities. Today, more structural actions must be implemented to correct the imbalance between territories.

Date: 2019-11
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Published in 2019

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Working Paper: The outlook for the finances of local authorities in France (2019)
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