TAX REVENUES IN THE LOCAL BUDGETS – PRECONDITION FOR LOCAL GOVERNMENTS’ FINANCIAL AUTONOMY

TAX REVENUES IN THE LOCAL BUDGETS – PRECONDITION FOR LOCAL GOVERNMENTS’ FINANCIAL AUTONOMY

DESISLAVA STOILOVA

Abstract

The purpose of this paper is to study financial decentralization in Bulgaria, by comparison with the values of some basic indicators reported by the new member states of the European Union. Analysis is focused on the following indicators: local revenues/GDP (%), local tax revenues/consolidated tax revenues (%), and local expenditures/consolidated expenditures of the public sector (%). The results indicate that Bulgaria has one of the most centralized models of tax revenues distribution among the new member states of the European Union. Because of comparatively low local revenues’ share into the GDP, as well as negligible share of local into the consolidated tax revenues, Bulgaria faces a low degree of fiscal decentralization. There is a serious discrepancy between financial resources and expenditure responsibilities of the local governments. Purposeful efforts are needed to consolidate local revenue capacity. The main priority in this aspect is tax system restructuring with the purpose of developing a modern local tax system and redistributing the tax burden.

Key words

local taxes, local budgets, financial decentralization, tax autonomy

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