Financing local government in Slovenia

Zan Oplotnik and Bostjan Brezovnik

Post-Communist Economies, 2004, vol. 16, issue 4, 483-496

Abstract: Financial resources are of essential importance for optimal local government functioning. Without a sufficient level of autonomy and resources, fiscal federalism is nothing more than an external appearance. With only one lower tier of government (municipalities), Slovenia is among the countries with a relatively low degree of decentralisation. The share of local finance amounts to around 5% of GDP (EU around 12%). Although the law allows creation of more lower tiers, no such units have been created yet. There are currently 193 municipalities, varying greatly in terms of population. Most of the local financial model discrepancies derive from: a) an inappropriate vertical tax structure and low level of local fiscal autonomy, b) an inadequate system of financial equalisation that is a strong disincentive to revenue mobilisation, c) absence of correlation between normative and actual expenditure/revenue, disregarding local characteristics, wealth and tax base, d) politically enforced decisions to found some 'fictitious' units, consequently reducing the role of local officials in political bargaining and lobbying.

Date: 2004
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DOI: 10.1080/1463137042000309575

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