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Equitable Vertical Sharing And Decentralizing Government Finance In South Africa

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Abstract

South Africa is at a crossroads in its decentralization policy. On the one hand, it has declared its intention to strengthen the fiscal powers of local governments. On the other hand, the institutional arrangements to guarantee fiscal decentralization -- revenue powers and expenditure responsibility -- have not yet been fully defined. Nor has a target been set for the vertical division of resources between the central and lower levels of government. The revenue dimension of fiscal decentralization in South Africa, particularly the question of an equitable vertical share for local governments, is the subject of this paper.In the first section of the paper, we ask how South Africa fits the profile of countries that are “good” candidates for decentralization. We then turn to a description of vertical revenue sharing as it presently exists in South Africa. We also offer a proposal about how an equitable vertical share for South Africa should be determined. A final section summarizes the results. The policy question raised in this paper is straightforward: What percent of all tax and non-tax revenues should be assigned to the central government and what percent should be assigned to the local government? The implementation question is also straightforward: Once the assignment is decided, how do we structure each revenue instrument to guarantee the “desired” assignment of resources?

Suggested Citation

  • Roy Bahl, 2001. "Equitable Vertical Sharing And Decentralizing Government Finance In South Africa," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0106, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    • Handle: RePEc:ays:ispwps:paper0106
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    1. Jorge Martinez-Vazquez & Baoyun Qiao, 2010. "Expenditure Assignments in China," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1028, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    2. Bird, Richard M., 1993. "Threading the Fiscal Labyrinth: Some Issues in Fiscal Decentralization," National Tax Journal, National Tax Association, vol. 46(2), pages 207-27, June.
    3. Prud'homme, Remy, 1995. "The Dangers of Decentralization," The World Bank Research Observer, World Bank, vol. 10(2), pages 201-220, August.
    4. Mr. Desmond Lachman & Mr. Kenneth Bercuson, 1992. "Economic Policies for a New South Africa," IMF Occasional Papers 1992/003, International Monetary Fund.
    5. Bird, Richard M., 1993. "Threading the Fiscal Labyrinth: Some Issues in Fiscal Decentralization," National Tax Journal, National Tax Association;National Tax Journal, vol. 46(2), pages 207-227, June.
    6. R W Bahl & S Nath, 1986. "Public Expenditure Decentralization in Developing Countries," Environment and Planning C, , vol. 4(4), pages 405-418, December.
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    1. World Bank, 2003. "Decentralizing Indonesia : A Regional Public Expenditure Review Overview Report," World Bank Publications - Reports 14632, The World Bank Group.

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