Fiscal Federalism in Switzerland: Relevant Issues for Transition Economies in Central and Eastern Europe

Fiscal Federalism in Switzerland: Relevant Issues for Transition Economies in Central and Eastern Europe
ISBN-10
0050627090
ISBN-13
9780050627099
Category
Decentralization in government
Pages
78
Language
English
Published
2005
Publisher
World Bank Publications
Authors
Bernard Dafflon, Krisztina Tóth

Description

Its highly fragmented structure of local governments and serious horizontal fiscal imbalances make Switzerland a surprisingly powerful model for Eastern European countries that are currently facing the challenge of fiscal decentralization. In spite of the substantial differences in the tradition and current practice of intergovernmental fiscal relations, transition economies may learn valuable lessons from the Swiss case in the fields of direct democracy, horizontal cooperation, expenditure and revenue assignment, and fiscal discipline. Among other conclusions, the authors suggest that subnational authorities can effectively fend off recentralization attempts of the central government if they engage in spontaneous cooperation to enhance the efficiency of public service provision. Together with an adequate fiscal equalization scheme, interjurisdictional cooperation also permits the reconciliation of the objective of an increasing devolution of powers with the existing regional disparities. The authors also show that the principle of subsidiarity can best be safeguarded by anchoring the expenditure and revenue powers of subnational governments in the constitution or in a similarly strong law. With regard to fiscal discipline, the combination of a "golden rule" with direct democratic instruments of budget control is proven to be successful in enhancing the accountability of local politicians toward their constituencies.

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