ABSTRACT
While the case for decentralizing revenue-raising responsibilities is a mixed one, the efficiency arguments for decentralizing the provision of public services are fairly strong. At the same time, there are significant possibilities for inefficiencies and inequities arising from decentralized fiscal decisions. The system of intergovernmental fiscal relations – equalization and conditional grant, and tax harmonization – is intended to achieve the full benefits of decentralization, while at the same time ensuring that decentralized decision making does not violate national efficiency and equity objectives (Boadway 2000).
