chapter  11
21 Pages

Fiscal Problems in a Union

T h e history of intercountry budgetary relations dates back to the payment of war reparations and indemnities and, in general, to the problems of international transfers between independent states. Such relationships were of a temporary character and involved, in most instances, two countries only. The sharing of the costs of international agencies, on the other hand, assumes permanence in intercountry budgetary relations. The first agreement of this kind was reached with respect to the Universal Postal Union in 1874, when state contributions to the expenses of this institution were based on various criteria, such as area, population, and the volume of postal traffic. This same arrangement was used by the Permanent Court of Arbitration at

The Hague and by the League of Nations. The latter subsequently adopted the principle of the ability to pay, although-in the absence of national income data-it had to rely on crude indicators, such as government revenue and population. A reinterpretation of the "capacity to pay" formula led later to the establishment of progressivity in contributions to the administrative expenses of the United Nations and to the program costs of the United Nations Relief and Rehabilitation Administration.