The Practice of Fiscal Federalism: Comparative Perspectives

451 Pages·2007·3.39 MB·English

by  Anwar Shah (Editor)

the practice of fiscal federalism
a global dialogue on federalism
A Joint Program of the Forum of Federations and
the International Association of Centers for Federal Studies
editorial board
co-chairs
Raoul Blindenbacher, Canada/Switzerland
Cheryl Saunders, Australia
senior editor, book series
John Kincaid, United States
David Cameron, Canada
J. Isawa Elaigwu, Nigeria
Thomas Fleiner, Switzerland
Fernando Rezende, Brazil
Horst Risse, Germany
Nico Steytler, South Africa
Ronald L. Watts, Canada
www.forumfed.org
www.iacfs.org
A Global Dialogue on Federalism publications available
book series
Constitutional Origins, Structure, and Change in Federal Countries (2005), Volume 1
Distribution of Powers and Responsibilities in Federal Countries (2006), Volume 2
Legislative, Executive, and Judicial Governance in Federal Countries (2006), Volume 3
booklet series
Dialogues on Constitutional Origins, Structure, and Change in Federal Countries
(2005), Volume 1
Dialogues on Distribution of Powers and Responsibilities in Federal Countries (2005),
Volume 2
Dialogues on Legislative, Executive, and Judicial Governance in Federal Countries
(2006), Volume 3
Dialogues on the Practice of Fiscal Federalism: Comparative Perspectives (2006), Volume 4
Dialogues on Foreign Relations in Federal Countries (2007), Volume 5
Dialogues on Local Government and Metropolitan Regions in Federal Countries (2007),
Volume 6
Select Global Dialogue publications are available in other languages, including
Arabic, French, German, Portuguese and Spanish. For more information on
what is available, please visit www.forumfed.org.
A Global Dialogue on Federalism
Volume IV
THE PRACTICE
OF FISCAL FEDERALISM:
COMPARATIVE PERSPECTIVES
edited by anwar shah
senior editor john kincaid
Published for
and
by
McGill-Queen’s University Press
Montreal & Kingston • London • Ithaca
© McGill-Queen’s University Press 2007
isbn 978-0-7735-3301-1 (cloth)
isbn 978-0-7735-3302-8 (paper)
Legal deposit fourth quarter 2007
Bibliothèque nationale du Québec
Printed in Canada on acid-free paper that is 100% ancient forest free
(100% post-consumer recycled), processed chlorine free
This book has been published with generous financial support from
the Government of Canada, the Swiss Agency for Development
and Cooperation, the World Bank.
McGill-Queen’s University Press acknowledges the support of the Canada
Council for the Arts for our publishing program. We also acknowledge
the financial support of the Government of Canada through the Book
Publishing Industry Development Program (bpidp) for our publishing
activities.
Library and Archives Canada Cataloguing in Publication
The practice of fiscal federalism: comparative perspectives / edited by
Anwar Shah; senior editor John Kincaid.
(A global dialogue on federalism; v. 4)
Includes bibliographical references and index.
isbn 978-0-7735-3301-1 (bnd)
isbn 978-0-7735-3302-8 (pbk.)
1. Federal government. 2. Federal government – Economic aspects.
3. Comparative government. I. Shah, Anwar II. Kincaid, John, 1946–
III. International Association of Centers for Federal Studies IV. Forum of
Federations V. Series: Global dialogue on federalism; v. 4
hj141.p69 2007 321.02 c2007-902348-7
This book was typeset by Interscript in 10/12 Baskerville.
Contents
Preface vii
Introduction: Principles of Fiscal Federalism anwar shah 3
Commonwealth of Australia alan morris 43
Federal Republic of Brazil fernando rezende 73
Canada robin boadway 98
Federal Republic of Germany lars p. feld/
jürgen von hagen 125
Republic of India govinda rao 151
Malaysia shankaran nambiar 178
Federal Republic of Nigeria akpan ekpo 204
Russian Federation alexander deryugin/
galina kurlyandskaya 235
Republic of South Africa bongani khumalo/
renosi mokate 262
Kingdom of Spain julio lópez-laborda/
jorge martínez-vázquez/carlos monasterio 287
Swiss Confederation gebhard kirchgassner 317
United States of America william fox 344
Comparative Conclusions on Fiscal Federalism anwar shah 370
vi Contents
Contributors 395
Participating Experts 401
Bibliography 409
Index 427
Preface
This volume on the practice of fiscal federalism in twelve federal countries
is the fourth contribution to a series of practical books on federalism being
published as a part of the program “A Global Dialogue on Federalism.”
The goal of this Global Dialogue is to engage experts from around the
world in comparative conversations and debates about core themes and is-
sues of federalism, with the aim of building an international network that
enables practitioners, students, scholars, and others to learn from one an-
other, share best practices, and enhance their understanding of the pros-
pects as well as the problems of federalism as a mode of governance
intoday’s world, especially in relation to democracy, freedom, prosperity,
and peace.
The Global Dialogue is a cooperative program created and conducted
jointly by the Forum of Federations and the International Association of
Centers for Federal Studies (iacfs). The Forum is an international net-
work on federalism that seeks to strengthen democratic governance by
promoting dialogue on, and understanding of, the values, practices, prin-
ciples, and possibilities of federalism. The iacfs is an association of
centres and institutes throughout the world that maintain a research and
teaching focus on political systems that have federal features.
The work of the Forum of Federations and the iacfs is part of a broader
endeavour to build and strengthen democracy through federalism when
and where appropriate. As a mode of governance that seeks to combine
self-rule for regional and minority interests with shared rule for general
and common purposes, federalism is necessarily of interest to advocates of
democracy. This is particularly true in a world in which the vast majority
of nation-states are multinational, multilingual, multireligious, and/or
multicultural. Indeed, there has been a tremendous upsurge of interest in
federalism since the emergence of a new wave of democratization in the
late 1980s. This worldwide interest in federalism is linked directly to
viii Preface
movements promoting greater democracy and decentralization and to the
simultaneous trends towards globalization and regionalization evident
throughout today’s world.
Given the dominance of statist ideologies during the past two centuries,
however, federalism has often been viewed as a stepchild less worthy of at-
tention and cultivation than the seemingly natural children of modern na-
tionalism. Consequently, while there is a long history of federal-democratic
experience in a few countries, such as Australia, Canada, Switzerland, and
the United States, there is little practical experience with democratic
federalism in most countries, and there are problematic experiences in a
number of fledgling federal democracies. In turn, there is a paucity of
accessible literature and information on comparative federalism and a
dearth of intellectual capital available for investment in research and
teaching about the many varieties of federalism worldwide.
This series of books, being published as one important product of the
Global Dialogue program, seeks to create informational capital and to
fill gaps in our comparative knowledge by providing as balanced a view
as possible of theories and practices of federalism in various countries
around the world. The series does this by exploring comparative and
contrasting theoretical and practical perspectives, with each volume fo-
cusing on a particular aspect of federalism through the examples of se-
lected countries that reflect federalism’s diversity, including its strengths
and weaknesses.
Our aim is to produce books that are accessible to interested citizens, po-
litical leaders, government practitioners, and students and faculty in insti-
tutions of higher education. Each chapter in this volume, therefore, seeks
to provide an overview of its country’s fiscal arrangements, institutions,
and practices in a way that covers all relevant, important information with-
out overwhelming the reader in detail, while also providing some analysis
of the rationales and workings of fiscal federalism and indicating how well
or poorly the fiscal arrangements and institutions function in relation to
their constitution and their society. Revenue is the lifeblood of all govern-
ments, but this is even more the case in federal countries where revenue
and expenditure responsibilities must be both divided and shared, and
where revenues must be transferred between governments for various
capacity and equity purposes.
The first volume, Constitutional Origins, Structure, and Change in Federal
Countries (2005), began the series with an exploration of the constitutional
systems of twelve federal countries. The second volume, Distribution of
Powers and Responsibilities in Federal Countries (2006), examines the various
practices and dimensions of power distribution in eleven federal countries.
The third volume, Legislative, Executive, and Judicial Governance in Federal
Preface ix
Countries (2006), examines the dynamics and interactions of the multiple
legislatures, executives, and courts that operate in federations. Future vol-
umes will be devoted to foreign affairs in federal countries, local govern-
ment and metropolitan regions, diversity and unity in federal countries,
and other important themes, with a somewhat different mix of countries
being represented in each volume. The Global Dialogue program also pro-
duces a booklet series that provides an entry point to each corresponding
book by highlighting the insights, key issues, and items of international in-
terest that arose at the country and international roundtables. In keeping
with their educative and accessible format, the booklets also include a glos-
sary of country-specific terminology. The corresponding booklet to this
book is available; indeed, the more limited scope of the booklet allows it to
be published quickly, in multiple languages, and reproduced as changes in
the federal countries warrant.
The conceptual framework of the program can be found in the first vol-
ume, Constitutional Origins, Structure, and Change in Federal Countries, edited
by John Kincaid and G. Alan Tarr. The key idea of the Global Dialogue is to
draw on the wealth of others’ experiences in order to learn from one an-
other. The program entails a comparative exploration of a dozen core
themes in federal governance. Through a series of themed roundtables,
participants representing diverse viewpoints in a representative and diverse
sample of federal countries search for new insights and solutions. The new
information emanating from the roundtables is used to produce compara-
tive materials for worldwide distribution.
Each theme exploration entails a multiple-staged process. First, a “theme
coordinator” is chosen, who makes use of the most current research on the
theme to create an internationally comprehensive set of questions covering
institutional provisions and how they work in practice. This set of questions,
or “theme template,” is the foundation of the program as it guides the dia-
logue at the roundtables and forms the outline for the theme book. The
theme coordinator also selects a representative sample of federal countries
and recommends, for each featured country, a “country coordinator” – each
of whom is the author of a country chapter in this volume.
Next, each country coordinator invites a select and diverse group of ex-
pert practitioners and scholars to participate in a roundtable in his or her
country, guided by the theme template. The goal is to create the most ac-
curate picture of the theme in each country by inviting experts with diverse
viewpoints and experiences who are prepared to share with and learn from
others in a non-politicized environment.
At the end of the day, the coordinators are equipped to write a short arti-
cle that reflects the highlights of the dialogue from each country round-
table. The booklet articles are generated from such exchanges.