Budgetary Systems, Local Finance, Finance EU
Public Economics
Filip Hrůza

The process of redistributing functions or powers from center to localities in term of hierarchy.
Dentralization concept is widely used in public administration, economics, law, but also in private
sector.
Decentralization of state power (public administration):
}Central government
}Regional government
}Local government
Decentralization

}1993 – Czechoslovakia was split to 2 independent states
}Administrative structure of the new state of unitarian nature was specified in the Constitution of
the Czech Republic (3 levels of government of the Czech Republic with separate budgets – CG / RG /
LG)
}Problems with regional levels in term of administration (RG – districts with the absence of
self-government features)
}2000 – districts were replaced by 14 self-governing regions by 2001
Introduction

}Municipalities are basic administrative units
}Intergovernmental expenditure assignments are driven mostly by principle of subsidiarity
}Municipalities are responsible within own and delegated responsibility (from higher levels):
-Own: elementary schools, street lighting, site planning, water distribution...
-Delegated: civil registry (birth, marriage, and death), building codes, regulation and enforcement
of laws pertaining to the environment...
Local Governments

}Municipalities are basic administrative units
}Intergovernmental expenditure assignments are driven mostly by principle of subsidiarity
}Municipalities are responsible within own and delegated responsibility (from higher levels):
-Own: elementary schools, street lighting, site planning, water distribution...
-Delegated: civil registry (birth, marriage, and death), building codes, regulation and enforcement
of laws pertaining to the environment...
Local Governments

}took over responsibilities from districts in 2001
}Responsibilities:
lsecondary school management
l2nd and 3rd class roads
lHospitals and social institutes Most of the
}Most of expenses are from delegated responsibility tasks
}RG are financed mostly by subsidies, the remaining is consisting of tax revenues and non-tax
revenues (2 %)
Regional Governments

}Inhabitants 10 532 770
}14 regions (Prague-municipality and region)
}6 249 municipalities
} Special case- NUTS II. (created for monintoring EU statistic)
}Fiscal decentralisation involves the transfer of taxing and spending powers to sub-national levels
of government
Czech republic and fiscal federalism

Fiscal Federalism
l division of responsibilities: finance, tasks, policy
(central government-localities)
l important questions:
lWho makes the decisions about the programs?
lWho pays for these programs?
l examples
lGovernment rule – Localities administer
lGovernment pays – Localities carry out

}Inhabitants 10 532 770 (december 2010)
}14 regions (Prague-municipality and region)
}6 249 municipalities
} Spcial case- NUTS II.-were artifficially created only for monintoring EU statistic
}Fiscal decentralisation involves the transfer of taxing and spending powers to sub-national levels
of government
Czech republic and fiscal federalism

Czech Republic Case



Fiscal decentralisation



Finance in FF

l general revenue-sharing (in CR: budgetary determination of taxes)
l system of sharing income of taxes among central budget – regional budgets – municipal budgets

VAT
lcentral government budget - 71,31 %
lregional budgets – 7,86 %
lmunicipal budgets - 20,83 %
Personal income tax, Company tax
lcentral government budget - 67,50 %
lregional budgets – 8,92 %
lmunicipal budgets - 23,58 %
Real estate tax
lmunicipal budgets - 100 %
Taxes Income Sharing I (CR)

Taxes Income Sharing II (CR)
Taxes income sharing criteria (Municipalities)
lcatastral territory of a municipality (3%)
lsimple number of inhabitants in the municipality (10%)
lmultiples of gradual transitions (80%)
lnumber of children and pupils attending a school run by a municipality (7%)

Source: http://www.ieb.ub.edu/phocadownload/informe-anual/en/InformeFF2010_i.pdf



Local government revenue



EU finance






EU finance



Thank you for your attention :-)