Practical insights into contemporary financial management

An open-access book by the Institute for Local Self-Government Maribor

Financial management as a scholarly field has been rapidly changing in the last few decades. This paradigm shift has been fueled by a number of factors, including the unprecedented development of ICT technology, globalization, man-made and natural disasters, and consequent crises.

A recent open-access book published by the Institute for Local Self-Government Maribor (Slovenia) draws attention on the development of financial management, both in the public and corporate sector. The book is an output of the Contemporary Financial Management Conference held in Belgrade, from 7-10 December 2022 and has 33 chapters, each with novel contributions to theory and practice of financial management. As for the topics – the chapters provide novel contributions to the literature related to diverse areas of financial management, including stock markets, cryptocurrencies, taxation, accounting and auditing, accounting and business intelligence, performance management and compensation, sustainable finance, financial technologies and much more.

Although the book’s chapters touch on a wide range financial management issues (not all relevant to local governments), numerous chapters pertain to different aspects of are financial management relevant in the context of multilevel governance. Key messages of identified specific and collective evidence on the development of financial management in public sector from various geographic regions in Europe:

  • Albanian Local Authorities’ Dynamics of Expenditures and the Structure of Financial Resources. Albania has undergone two decentralization reforms in the post-communist period, the first in the late 1990s and the second in 2014. The paper examines the dynamics and structure of financial resources and expenses of municipalities. It finds no significant differences in the structure of financial resources and expenses between 2015-2018 and 2019-2021. However, despite recent improvements, there are still insufficient financial resources for local governments to effectively execute their mandated competences. The main source of funding is unconditional transfers from the state budget, which municipalities can use as they choose. The financial resources available to local governments are still insufficient to meet their needs, despite the significant number of powers and responsibilities transferred to them in 2015. (Nevila Xhindi & Teuta Xhindi).
  • Behavioral Interventions in Tax and Fee Collection – Not Always a Success (Banská Bystrica, Slovakia). Intergovernmental relations determine tax allocation and distribution between national and sub-national levels. Local governments rely on local taxes and fees for revenue and public services. To increase efficiency, they use behavioral interventions, such as nudges, to reduce non-payers. Research show that these interventions can sometimes fail, as demonstrated in the Slovak city of Banská Bystrica, where the intervention did not yield expected results and identified potential factors. The paper analyzes an experiment in Banská Bystrica aimed at reducing tax and fee arrears through behavioral interventions. The main reason for this was the heterogeneity of the research sample, which included tax defaulters, local dog tax, and municipal waste fees. The composition of taxpayers in the intervention and control groups was also a significant factor (Mária Murray Svidroňová, Katarína Vitálišová, Nikoleta Jakuš, Muthová & Juraj Nemec).
  • Benchmarking the Efficiency of Montenegro’s Local Self-governments. The study analyzes Montenegro’s local self-governments’ technical efficiency and the impact of tourism activity on efficiency. Analysis demonstrated that Montenegro could develop a decentralized governance system based on its citizens’ needs, but further reforms would require evidence-based policy decisions based on performance benchmarks for overall efficiency. Inefficient internal practices and scale inefficiency were identified as primary sources of technical inefficiency. To improve Montenegro’s LSGs’ efficiency, it is necessary to improve the financial management and operational management know-how of management personnel. Re-evaluating the territorial organization of local self-governments and the scope of responsibilities allocated to LSGs would have the biggest impact on overall efficiency (Branko Radulovic, Stefan Dragutinovic & Bojana Boskovic).
  • Impact of Behavior Nudges on Tax Compliance: Age as a Factor in Municipalities in the Republic of North Macedonia. The study investigates the impact of tax behavior nudging on non-compliant property taxpayers in three Macedonian municipalities. Results show deterrence messages were significantly more effective than social norm and public good messages. Age was found to be negatively associated with tax compliance behavior.  The study reveals that different messages can have different effects on taxpayers’ behavior, depending on local beliefs and values. Factors such as gender and age may also be statistically significant in individuals’ tax compliance decisions. The study provides evidence on the importance of policymakers managing and using opportunities to influence citizens’ beliefs with behavioral nudges, customized to taxpayers’ profiles (Vesna Garvanlieva Andonova & Marjan Nikolov).
  • Promises and Perils of E-taxation in Serbia. The paradigm of collection and administration of tax revenues has been shifted in the last few decades as affected by the development of novel information and communication technologies. Governments around the world have adopted different models of e-taxation. A Serbian government has fully implemented “e-Fiscalization” as a class of e-taxation services in 2021. This paper discusses the fiscal process as an integrated part of the development of the Tax Administration of the Republic of Serbia, aiming to increase transparency, minimize business costs, and establish a sustainable tax system. Although Serbia is still in the early stages of digitization and reform, digitization could help the tax system close the gap and achieve European Union standards (Sergej Popović, Miloš Milosavljević & Nemanja Milanović).
  • Financial Management of Budgetary Revenues via Enhanced Digital Tax Literacy in Serbia.  This paper explores digital tax literacy (DTL) in Serbia, focusing on 385 participants and OECD survey results. It aims to provide empirical evidence for DTL enhancement, resulting in more efficient, transparent, lower costs, and higher productivity. The study found that Serbia’s tax administration has a good foundation for enhancing digital tax literacy through digital habits and partial use of digital services. However, the current level of digital tax literacy is basic and unevenly spread among generations. The study recommends Serbia’s Tax Administration and public authorities focus on taxpayer education and establish effective cooperation with education and research institutions. (Goran Radosavljević, Aleksandra Lazevski, Mihajlo Babin & Miloš Erić).
  • Revisiting the Efficiency of Performance Budgeting in OECD Countries: Lessons for Balkan Countries. Performance budgeting is being introduced as a legal obligation across all Balkan countries, with most countries having implemented budgeting reforms in the last two decades. This method is seen as a tool for achieving “Value for Money,” accountability, transparency, efficiency, and effectiveness of resource allocation. Research confirms that performance budgeting improves the budgeting process efficiency, promotes transparency of policies, accountability of public bodies, and informs decision-makers on more effective budget spending (Meldina Kokorović Jukan & Elman Nadžaković).

Read the full article (Open Access):
Institute for Local Self-Government Maribor, Slovenia Contemporary Financial Management (Slađana Benković, Veljko Dmitrović,  Miloš Milosavljević).