Research Report
Ⅰ. Background and purpose of the research
□ Recently, the soundness of local government finance has been seriously challenged and accordingly the government and society have become attentive to local government finance problems. This is because there has not been established an overall system of planning and management in the central government policy with respect to local government finance in particular, and consequently the lack of a combined and correlated system between central and local governments has caused hardship in set up a comprehensive, systematic proposal to reform government finance system including the one of local governments.
□ this research project will study the law and policy of other countries on local government finance as well as the nation's fiscal health and establishment of financial strategy in order to find a measure of securing and enhancing fiscal health and transparency of local governments as is the case for central government.
Ⅱ. Main contents
□ United Kingdom
○ The financial principles of U.K. provide a foundation necessary for performing policies of central and local governments to achieve continuous economic growth and employment stability. There are five financial principles in U.K.: transparency, stability, accountability, equity and efficiency.
○ U.K. has a local tax system called the “council tax” and the central government supports local governments through various financial assistance and renovation programs. In fiscal year 2008/2009, about sixty percent of the local government finance, including redistribution of the business rates, depended on the central government and the remaining 40% consists of council tax, fees, rents, interest income and so on.
□ France
○ the distinctive feature of the financial adjustment system of France is in that multiple subsidies take parts together in the financial adjustment mechanism and the adjustment is carried out according to the principles of optimization and differentiation corresponding to diversity of local governments.
○ the central government is applying the opinion of the committee of local government finance, in advance, a neutral organ in the system of governmental subsidy and grant, and by doing so, the central government minimizes conflicts between local and central governments.
○ the French government abolished ex-ante financial control system by financial transfers from the central to local governments, while expanding the autonomy of local governments, and it administers ex-post financial control to ensure accountability and tries to concentrate on building mutual trust and respect between central and local governments.
□ Germany
○ The Constitution of Germany guarantees financial sovereignty of state and local governments, so fiscal autonomy of local government is guaranteed in some degree.
○ Particularly, tax sharing system and horizontal fiscal equalization system are important distinctions in fiscal relationship between central and local governments of Germany. Although the controversy still remains with respect to horizontal fiscal equalization system, Germany has coped with the conflicts adequately through accumulated practices and compromises among stakeholders.
Ⅲ. Expected benefits
□ legislations and policies of other countries are based on different political order and legal system, but their legislative research and practice of fiscal management system of central and local governments, fiscal health policies and enhancement of accountability of local governments, gives us helpful implications to respond to the current local financial emergencies and would provide us basic resources for the present and prospective research on related problems.