| Abstract: |
In South and East Asian countries a highly centralized government prevails,
although recently some trends are moving toward a greater degree of
decentralization. Also the two giants China and India, which cannot rely on a
merely centralized Government, have experienced a greater or lesser degree of
fiscal unionism. As to China the local government system provides four levels:
provincial level; city level; county level; township level. Intergovernmental
fiscal relations were revamped by the 1994 reform that established a new tax
sharing system and gave local governments more control over the administration
of local taxes but no significant degree of tax autonomy and no substantial
expenditure assignments. The local financial revenue mainly derives from local
taxes, shared taxes, and nontax revenue. As to India, the federal system is
quite complex. The center-states relations are envisaged in the Constitution
also for the financial aspects: two constitutional amendments adopted in 1992
made India one of the most politically decentralized countries among
developing ones. However, the implementation of the decentralization program
is still lagging: till now India seems to have considered decentralization
mainly in terms of the local election system, without the transfer of all
functions provided for devolution to local bodies. Only India set up a
different system of local bodies in rural and urban areas with different
expenditure responsibilities and financing powers. On the contrary, China has
a unitary fiscal system. In India it is necessary to redesign the transfer
system to improve accountability, incentives and equity, whereas in China, the
fiscal revenue sharing schemes limit intergovernmental budget transfers.
Finally, the rule of hard budget constraint in China is faced by all levels of
government, while in India sub-national governments face soft budget
constraint. |