us to develop a fuller picture of the extent to which fiscal autonomy differs across OECD
countries7.
A number of measures are given in OECD (1999). First, they indicate the extent to which
sub-central governments rely on their own taxes, which gives a measure of how important
local taxes are in the total tax burden of citizens. Second, they show the degree to which sub-
central governments control their own tax base or tax rates. The OECD classification system
shows the percentage of sub-central taxation (by level of jurisdiction if there are more than
two layers of government) which falls into one of eight categories of taxation. These range
from type (a) sub-national taxes where the sub-central government can itself setboth the tax
rate and tax base, to (e), where central government sets both the base and the rate of taxation.
Category (d) captures tax-sharing arrangements, which in turn are divided into four
categories: these range from (d.1) where the sub-central government can determine the
revenue split, to the other extreme in (d.4) where national government can unilaterally decide
the revenue split.
In Figure 2, we summarise this evidence. The vertical axis plots the percentage of sub-central
taxation in total taxation, so provides a measure of the importance of sub-central government
in the financing of public services. The horizontal axis plots an overall index of ‘fiscal
control’, which is an overall weighted index of the extent to which sub-central taxation is
controlled locally. It follows that the countries closest to the north-east corner of the graph are
those in which the sub-central governments have the greatest degree of fiscal autonomy:that
is sub-national jurisdictions have control over a large share of total taxation and have greater
control on taxation receipts.
7 Although this data still neglects some important issues. For instance, comparative data have not so far been
collected on the extent to which sub-central governments face limits on change tax rates and the tax base (e.g.
expenditure or revenue capping).
10
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