Fiscal federalism is a critical area of study as it underpins almost all other facets of subnational governance.
The overriding issue in fiscal federalism is referred to as the assignment problem, that is, the assignment of different relevant fiscal responsibilities to different levels of government. The assignment of taxing powers, government expenditures, and regulatory responsibilities, are all components of a state’s fiscal toolbox. These fiscal instruments are particularly pertinent in federal and quasi-federal countries with multiple levels of empowerment subnational government.
Federal countries have to consider a range of key intergovernmental finance arrangements, including assigning the responsibility for service provision, taxation responsibilities, the provision of intergovernmental transfers to different government levels, and so on. The manner in which all these components are managed differs from federal country to federal country, for a wide range of reasons. Some countries may have more centralized federal systems, with more powers and responsibilities accrued by the national government, while others have more heavily decentralized systems, where the bulk of responsibility lies with the constituent units of the federation.
In order to provide comparative cross-cutting analysis on fiscal federalism management in multi-level systems, the Forum of Federations recently released The Forum of Federations Handbook of Fiscal Federalism, edited by Jean-François Tremblay. The volume compiles the latest research from the world’s preeminent network for expertise on federal and decentralized governance and offers in-depth insights into 11 key federal countries and their fiscal arrangements.
Each chapter examines an individual country, laying out its constitutional design as relates to fiscal powers and the division of those powers between levels of government. Specifically, the analyses consider intergovernmental fiscal relations in Australia, Brazil, Canada, Ethiopia, Germany, India, Italy, South Africa, Spain, Switzerland, and the United States.
Each of the 11 country case studies follow a similar structure which covers key questions on the structure of government and allocation of expenditure responsibilities, taxation responsibilities, intergovernmental fiscal transfers and revenue sharing, macroeconomic management, and ongoing challenges to their structure of fiscal federalism. Further, these chapters provide an outlook on how the ongoing COVID-19 global pandemic has affected their systems of fiscal federalism, and how they have adapted to the crisis.
The Handbook concludes with a chapter offering a comparative analysis on this subject, tying together recurring themes from each of the chapters, and offering some summary thoughts and analysis that might serve as guiding lessons to future work that might be doing in this field.
More information and access to the handbook:
Jean-François Tremblay (ed). 2023. The Forum of Federations Handbook of Fiscal Federalism, Springer / Palgrave Macmillan.
An open access PDF version of the handbook available on the website of Springer / Palgrave Macmillan.