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Tax Decentralization: Solutions for Bulgaria

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  • Konstantin Pashev

Abstract

The study draws on the theory of optimal taxation and the practice in a number of federal and unitary countries to outline the conceptual framework of the allocation of revenue responsibilities among levels of government. À distinction has been made between decentralized tax policy (the power to set tax bases and rates) and tax administration (collection of taxes). Possible solutions for Bulgaria are drawn and formed on this base. It has been justified that, the strengthening of the tax autonomy of local government is the main objective of the reform in local finances but appropriate taxes are few in number and are with à limited revenue potential. Optimization of the real estate tax has been proposed, including taxation on local incomes from rent as well as local patent tax. The revenue potential of these autonomous local taxes especially in small municipalities is not large, which leads to the necessity of a semi-autonomous parallel local tax on personal incomes, as well as substantial central subsidies i.e. re-allocation of tax revenues across municipalities.

Suggested Citation

  • Konstantin Pashev, 2007. "Tax Decentralization: Solutions for Bulgaria," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 7, pages 67-88.
    • Handle: RePEc:bas:econth:y:2007:i:7:p:67-88
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    1. Tugrul Gurgur & Anwar Shah, 2014. "Localization and corruption: panacea or pandora's box?," Annals of Economics and Finance, Society for AEF, vol. 15(1), pages 109-136, May.
    2. Konstantin Pashev, 2006. "Presumptive Taxation: Lessons from Bulgaria," Post-Communist Economies, Taylor & Francis Journals, vol. 18(4), pages 399-418.
    3. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
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    More about this item

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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