Horizontal Fiscal Imbalances As Differences in Net Fiscal Benefits
A horizontal fiscal imbalance (HFI) emerges when subnational governments have different abilities to raise funds from their tax bases and to provide services. This creates differences in ‘net fiscal benefits’, which are a combination of levels of taxation and public services. It is these NFBs which are the main cause of horizontal fiscal disparities that in turn generate the need for equalization grants. Prominent among the objectives commonly attributed to intergovernmental fiscal transfers is ‘equalization’ of fiscal capacities or resolution of Horizontal Fiscal Imbalances.
Thus, the transfer system can promote efficiency in the public sector and can level the field for intergovernmental competition. The discussion of horizontal fiscal imbalance and equalisation was of particular importance in the drafting of the new Iraqi constitution. It was a sticking point for the drafting process—with the oil rich regions seeking to minimise the reallocation of revenue while other regions sought to maximise equalisation payments.
Read more about this topic: Fiscal Imbalance
Famous quotes containing the words horizontal, differences, net and/or benefits:
“Thir dread commander: he above the rest
In shape and gesture proudly eminent
Stood like a Towr; his form had yet not lost
All her Original brightness, nor appear’d
Less than Arch Angel ruind, and th’ excess
Of Glory obscur’d: As when the Sun new ris’n
Looks through the Horizontal misty Air
Shorn of his Beams, or from behind the Moon
In dim Eclips disastrous twilight sheds
On half the Nations, and with fear of change
Perplexes Monarchs.”
—John Milton (1608–1674)
“Traveling, you realize that differences are lost: each city takes to resembling all cities, places exchange their form, order, distances, a shapeless dust cloud invades the continents.”
—Italo Calvino (1923–1985)
“A man’s whole life is taxed for the least thing well done. It is its net result.”
—Henry David Thoreau (1817–1862)
“While greedy good-doers, beneficent beasts of prey,
Swarm over their lives enforcing benefits ...”
—Robert Frost (1874–1963)