The intergovernmental grant system intends to promote fiscal cooperation among the levels of government. The purpose of the system is to support lower levels of governments in order to increase their fiscal capacity.
There are three ways to transfer funds among the levels of government. First, funds can flow from central government to subnational governments. Second, funds may flow from an upper level of subnational government to a lower level of subnational government. Third, funds can be shared among the same levels of government.
The intergovernmental grant system makes up for the inferior fiscal conditions of subnational governments. Metropolitan areas or high-income regionsalways take advantage of their fiscal superiority, because the revenue sources are unequally distributed among subnational governments.
There are several purposes for intergovernmental grants.
First, they may reduce vertical fiscal imbalance between the central and subnational governments. Second, they may alleviate horizontal imbalance among subnational governments. Third, they may internalize externalities so as to improve efficiency in resource allocation. This study analyzes five overseas intergovernmental grant systems, which are United Kingdom, France, Germany, Japan, and the United States. The findings of the international experiences help to formulate an effective intergovernmental grant policy in Korea.
Implications for the UK experience are as follows. First, the ratio of own-source revenue to total local revenue is relatively low. Second, the standard expenditure measure in the UK is the similar to the Korean measure. Third, the size of certain intergovernmental grants is decided by an agreement between the central and subnational governments.
There are two implications for the German experience.
First, the German system has a so-called 'common spirit' that is shared by local governments. Second, the German system is characterized by common taxation.
Implications for the French experience are as follows.
First, the intergovernmental grant system in France emphasizes current expenditures among various expenditures,such as capital expenditure, tax-aid
expenditure, and so on. Second, the French system focuses on the lower levels of government rather than on higher levels of government. Third, the central government in France pays attention to voices from local governments and tries to minimizeconflict between the central and subnational governments. Fourth, the French system has abolished the pre-control method for local finance and adopted an after-control method for local finance. As a result, the central government wins the confidence of local governments.
Implications for the Japanese experience are as follows.
Though the overall Japanese system seems to be similar to the system in Korea, there are several differences between the two systems. First, although the external shape of the grants is similar in the two countries, internal operation of the grants is quite different. Second, there is a tendency to use block grants in the case of national subsidies. Third, there is a reform of grant operations by local governments.
Implications for the U.S. experience are as follows. First, the US system uses various formulas to distribute grants. These formulas employ income per capita, population, tax effort index, and so on, as variables. Second, grant segmentation is not popular in the U.S. Third, the size of formula grants is much bigger than the size of project grants.
주요국 지방재정지원제도 비교분석(A comparative analysis of intergovernmental grant system in selected countries)
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Economic Administration
Government and Law < Public Administration