A COMPARATIVE ANALYSIS OF LOCAL GOVERNMENT FINANCIAL AUTONOMY IN ALBANIA

Abstract

Purpose- The financial aspect of local government autonomy is considered a very important topic in the public finance literature especially for the developing countries. Fiscal autonomy empowers the local government units with the right means to provide better services for the community and to proper allocate the funds based on the citizens needs. The purpose of this paper is to study the level of financial autonomy in Albanian municipalities and compare the characteristics within different units of local government. 

Methodology- In this paper we analyze the financial autonomy of Albanian municipalities by proposing an index to compare the governmental units and classify them in four classes according to the degree of autonomy. Seven quantitative indicators are used in the index, with different importance coefficients.

Findings- In Albania, while important progress has been made on advancing the decentralization reform in the last decade, autonomy of local government still remains a challenge. Local authorities do not have appropriate financial resources and they are depended on transfers from the central government budget.

Conclusion- The index results show that only a small share of local expenditures is covered by local tax revenues, while intergovernmental transfers constitute an important source of funds for the execution of local functions and service delivery.

  

Keywords

• Local government,fiscal autonomy,intergovernmental transfers,own revenues

References

1. Akai, N., Nishimura, Y. and Sakata, M. (2007). Complimentarily, Fiscal Decentralization and Economic Growth. Economics of Governance 8: 339–62.
2. Bahl, R. (1999). Fiscal Decentralization as Development Policy. Public Budgeting and Finance Summer: 59–75.
3. Bahl, R. and Linn, J. F. (1992). Urban Public Finance in Developing Countries. New York: Oxford University Press.
4. Beer-Tóth, K. (2009). Local Financial Autonomy in Theory and Practice. The Impact of Fiscal Decentralization in Hungary, Fribourg: University of Fribourg.
5. Blöchliger, H. and King, D. (2005). Fiscal Autonomy of Sub-central Governments. OECD Network on Fiscal Relations across Levels of Government. Paris: OECD.
6. Cigu, E. and Opera, F. (2012). Method of Determining the Degree of Autonomy of the Administrative-Territorial Units. Journal of Public Administration, Finance and Law.
7. Clark, G. L. (1984). A Theory of Local Autonomy. In: Annals of the Association of American Geographers, 74 (2), 195-208.
8. Council of Europe. (2005). Explanatory Report of European Charter of Local Self-Government (ETS No. 122); http://conventions.coe.int/treaty/en/Reports/Html/122.htm, retrieved 22 September 2005.

9. Council of Europe. (1985). European Charter of Local Self-government. European Treaty Series No.122, Strasbourg.
10. Council of Europe. (2000). Effects on the Financial Autonomy of Local and Regional Authorities Resulting from the Limits set at European Level on National Debt. Local and Regional Authorities in Europe, No. 71.
11. Dillinger, D. (1992) Urban Property Tax Reform Guidelines and Recommendations, UMP paper 1, The World Bank, Washington, D.C.
12. Ebel, R. D. and Yilmaz, S. (2002). On the Measurement and Impact of Fiscal Decentralization. Policy Research Working Paper 2809, Washington D. C., The World Bank.
13. Goldsmith, M. (1990). Local Autonomy: Theory and Practice. In: KING, Desmond S. and Pierre, Jon (eds). Challenges to Local Government. London: Sage, 15-36.
14. Hansen, T. and Klausen, J. E. (2002). Between the Welfare State and Local government Autonomy. In: Local government Studies, 28 (4), 4766.
15. Journard, I. and Kongsrud, P. M. (2003). Fiscal Relations across Government Levels. OECD Economic Studies, No. 36, 2003/1. Paris: OECD.
16. Law no. 8652, dated 31 July 2000 "On organization and functioning of local governance”, as amended, and Law no. 8653, dated 31 July 2000. On administrative-territorial division of local government units.
17. Ligji Nr.115/2014, Për ndarjen administrativo-territoriale të njësive të qeverisjes vendore në Republikën e Shqipërisë.
18. Meloche, J. P., Vaillancourt, F. and Yilmaz, S. (2004). Decentralization or Fiscal Autonomy? What Does Really Matter? Effects on Growth and Public Sector Size in European Transition Countries. World Bank Policy Research Working Paper No. 3254. World Bank.
19. Mills, E. S. (1998). Is Land Taxation Practical? Illinois Real Estate Letter, Published by the Office of Real Estate Research, University of Illinois at Urbana Champaign.
20. Ministria e Financave, Republika e Shqipërisë. (2015). Strategjia Ndërsektoriale për Decentralizimin dhe Qeverisjen Vendore 2015 – 2020.
21. Ministria e Financave, Republika e Shqipërisë. (2016). Raporti i Monitorimit të Strategjisë për Decentralizimin dhe Qeverisjen Vendore 2015-2020.
22. Molander, P. (2004). Introduction, Problems of Multi-level Democracies, in P. Molander (ed.) Fiscal Federalism in Unitary States, pp. 1–8. Boston/Dordrecht/New York/London: Kluwer Academic Publishers.
23. Musgrave, R. A. (1959). The theory of public finance: a study in public economy. McGraw-Hill, New York.
24. Musgrave, R. A. (1976). Optimal Taxation, Equitable Taxation and Second-Best Taxation. Journal of Public Economic 6, 3-16.
25. Musgrave, R. A. and Musgrave, P. B. (1973). Public Finance in Theory and Practice. Tokyo: McGraw-Hill Kogakusha.
26. NALAS, (2015). Report: Fiscal Decentralization Indicators for South-East Europe, 2006-2014. Network of Associations of Local Authorities of South East Europe (NALAS).
27. Nenkova, P. (2014). Fiscal Decentralization and Local Finance Reforms in Bulgaria: A Review of Ten Years’ Experience, Mediterranean Journal of Social Sciences, 5(23), pp. 342-352. doi:10.5901/mjss.2014.v5n23p342.
28. Network of Associations of Local Authorities of South-East Europe NALAS (2016), Fiscal Decentralization Indicators for South-East Europe: 2006-2014.
29. Oates, W. E. (1972). Fiscal Federalism. New York: Harcourt Brace Jovanovich.
30. OECD, (2001). Fiscal Design across Levels of Government, Year 2000 Surveys Summary Note. OECD, Directorate for Financial, Fiscal and Enterprise Affairs. Paris: OECD.
31. OECD, (2006). Network on Fiscal Relations across Levels of Government. Fiscal Autonomy of Sub-Central Governments. Working Paper no. 2.
32. Oliveira, J. and Martinez-Vazquez, J. (2001). Czech Republic: Intergovernmental fiscal relations in the transition. World Bank: Washington. http://dx.doi.org/10.1596/0-8213-5043.
33. Olowu, D. (1985). Prospects of the property rates as an additional revenue source for Nigerian local governments. Quarterly Journal of Administration, OAU. Ile-Ife. P. 305-322.
34. Oulasvirta, L. and Turala, M. (2009). Financial autonomy and consistency of central government policy towards local governments. International Review of Administrative Sciences, Vol. 75 (2), pp. 311–332.
35. Oulasvirta, L. and Turala, M. (2005). Measuring the Financial Autonomy of Local Governments with a Local Autonomy Index. Glasgow Caledonian University, Caledonian Business School, Working Paper No. 40, November.
36. Rodriguez-Pose, A. and Kroijer, A. (2009). Fiscal Decentralization and Economic Growth in Central and Eastern Europe. Growth and Change, 40 (3):387-417.
37. Stegarescu, D. (2005). Public Sector Decentralisation: Measurement Concepts and Recent International Trends, Fiscal Studies 26(3): 301– 33.
38. Tiebout, Ch. (1956). A Pure Theory of Local Expenditures, Journal of Political Economy 64(5): 416–24.
39. Verhoest, K., Peters, G. B., Bouckaert, G. and Verschuere, B. (2004). The study of organizational autonomy: a conceptual review. In: Public Administration and Development, 24 (2), 101–118.
40. Wetzel, D. (2002). Decentralization in the Transition Economies: Challenges and the Road Ahead. Washington, DC: World Bank.
41. Wolman, H., McManmon, R., Bell, M. and Brunori, D. (2010). Comparing Local Government Autonomy across States. In The Property Tax and Local Autonomy, The Lincoln Institute.