See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/24137646

Fiscal Federalism in Russia: A Canadian Perspective

Article · February 2001

Source: RePEc

CITATIONS READS
11 103

1 author:

Richard M. Bird
University of Toronto
277 PUBLICATIONS   7,344 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Fiscal Decentralization and Local Finance in Developing Countries View project

Financing local government View project

All content following this page was uploaded by Richard M. Bird on 23 May 2014.

The user has requested enhancement of the downloaded file.

 A PERSPECTIVE ON FISCAL FEDERALISM IN RUSSIA

Richard M. Bird
International Tax Program, Rotman School of Management, University of Toronto
and Petro-Canada Scholar, C.D. Howe Institute

Revised , November 15, 2000

1
 A Perspective on Fiscal Federalism in Russia

Richard M. Bird1

1. Introduction

Five questions arise with respect to intergovernmental finance in any country:

(1) Who does what? -- the question of expenditure assignment.

(2) Who levies what taxes? -- the question of revenue assignment.

(3) How is any imbalance between the revenues and expenditures of subnational governments
that results from the answers to the first two questions to be resolved? -- the question of
vertical imbalance.

(4) To what extent should fiscal institutions attempt to adjust for the differences in needs and
capacities between different governmental units at the same level of government? -- the question
of horizontal imbalance, or equalization.

(5) What, if any, rules exist with respect to subnational borrowing?

A sixth important question concerns how these four questions are answered -- the institutional
framework within which the technical and political problems of fiscal federalism are resolved.

In principle, each of these questions has to be analyzed in the specific circumstances of each
country in order to achieve to the extent possible the policy objectives relevant to that country. Such
objectives may include not only the normal public finance trio of efficiency (allocation), equity
(distribution), and stabilization but also economic growth and such nebulous but politically resonant
goals as regional balance and maintaining national integrity and political stability. Moreover, in the case
of transitional countries such as Russia, additional important objectives may include the development of
market-facilitating institutional infrastructure (property rights, rule of law, etc.) and a public sector viably
separate from private market activity. Not only may these various objectives conflict in theory and
practice, but there are also often differences between local and central perceptions of the weights that
should be attached to them. Moreover, intergovernmental fiscal policies have to take into account both
political constraints (such as the strength of different regions and groups in political decisions) and
economic constraints (such the level of development of financial markets). Finally, policy change in any
country must of course start from where one is. Since every country has its own history, the current
state of fiscal institutions in large part reflects the results of an accretionary process of policy change

1.International Tax Program, Rotman School of Management, University of Toronto, and Petro-Canada Scholar, C.D. Howe Institute.

2
over time. To understand, let alone to resolve, the intergovernmental fiscal puzzle in any country thus
requires substantial institutional as well as analytical knowledge.

Since all countries are different, and no federal country is exactly like any other country,
international comparisons of federal financial arrangements are hence both difficult to make and hard to
interpret once made. In Canada, for example, the “two worlds” of federal-provincial and provincial-
local fiscal relations are almost totally different in most relevant respects (Bird and Chen, 1998). In
Russia, not only does the federal government’s role extend much more deeply into the local government
sector than in Canada (Meekison, 2000), but governments at all levels remain deeply involved in what in
most countries would be considered private sector activities. Nonetheless, despite the difficulties of
comparing one country to another, it can be useful to consider the experience of one country in light of
the experience of other countries – not because such experience necessarily reveals what should be
done but simply because it is always illuminating to see how others, albeit in different circumstances,
handle similar problems. If a country wishes to understand itself better, one approach is to study others
– both their successes and their failures.

This paper contains some reflections on the fiscal structure of the Russian Federation in light
both of Canada’s lengthy experience with federalism and the experience of federal states more
generally. For background, the paper draws heavily upon extensive previous work on both Canada
and on international comparisons of federal finance, although this work is not reported in depth here.2
Nor does the paper contain an in-depth discussion of Russia. What little I know of the complex
situation in that country comes from a few secondary sources such as Treisman (1999) and especially
Martinez-Vazquez and Boex (1999) although I have also drawn upon earlier work on fiscal
decentralization issues in transitional countries in general.3 I do not pretend in this paper to analyze the
complex and changing Russian situation. My aim is simply to reflect upon what we have learned to date
about what may perhaps be labeled the universal aspects of some of the complex questions raised
above and to consider how this knowledge seems to apply to what little I know about the Russian
case.4

The paper is organized as follows. Sections 2 through 5 review the key instrumental
components of intergovernmental fiscal relations in any country – expenditures, revenues, transfers, and
borrowing. Section 6 considers several institutional aspects of decentralization which seem particularly
important in the case of the Russian Federation. A brief Section 7 concludes.

2
See, on Canada, Bird (1987, 1993), Bird and Chen (1998), Bird and Tassonyi (1999), and Bird and Vaillancourt (2000),
and on international comparisons, Bird (1986), Bird (1994), Bird and Chen (1998a), and Bird and Vaillancourt (1998).
3
See, in particular, Bird, Ebel and Wallich (1995) and Bird and Banta (2000). Dunn and Wetzel (1999) provide a useful
recent overview of decentralization experience in transitional countries.
4
This paper overlaps to a considerable extent with two other recent papers – Bird (2000) and Bird (2000a) – and
indeed is organized along the same pattern as the latter --, although neither of these papers focuses on the
transitional problems that have been so prominent in the Russian Federation.

3
 2. Expenditures

In many ways, the basic requirement for efficient and effective subnational government may be
thought of as the "matching principle."5 Ideally, to the extent possible, benefit areas should be matched
with financing areas, as in the benefit model of local finance. In addition, expenditure responsibilities
should be matched with revenue resources and, most importantly, revenue capacities should be matched
with political accountability.

Assigning Expenditures

The basic rule of efficient expenditure assignment is often taken to be to assign each function to
the lowest level of government consistent with its efficient performance. A well-known manifestation of
this principle is the rule of “subsidiarity” in the European Union. In the economic literature, much the
same idea is expressed in the so-called “decentralization theorem” (Oates, 1972).6 So long as there are
local variations in tastes and costs, there are clearly efficiency gains from carrying out public sector
activities in as decentralized a fashion as possible. Under this approach, aside from the important issue
of distribution, almost all public services (other than national defence, foreign policy, and surprisingly few
others) should in principle be delivered at the subnational level, with local decision-makers deciding
what services are provided, to whom, and in what quantity and quality, and – importantly -- with local
taxpayers paying for the services provided.

If, however, the service in question is one of national importance (research?) or one in which
there is a strong national interest in maintaining standards (poverty alleviation?), it should presumably be
funded -- and the extent to which it is achieved, monitored -- by the central government. In particular,
as Bird and Rodriguez (1999) argue, it is seldom appropriate to delegate major redistributional
responsibilities to lower levels of government.7 Canada has this allocation largely right at the federal-
provincial level (if not, in all provinces, at the provincial-local level), largely because the major
interpersonal redistributional policies (pensions, employment insurance, child benefits) are at the federal
level, but Russia equally clearly has it wrong, as Martinez-Vazquez and Boex (1999) stress.

The approach to expenditure assignment set out in the preceding discussion need not be
consistent with the matching principle. There is nothing to guarantee that the bundle of services assigned
under this approach to any particular level of government will be matched by the set of revenue
instruments assigned to that same level. On the contrary, in virtually every federal country a fundamental
imbalance arises in the vertical assignment of expenditures and revenues with the result that
5
This argument is set out in detail in Bird (1993a). Note that the somewhat awkward term “subnational” is used in
this paper to encompass both regional (provinces/ oblasts or, more generally “subjects of the federation”) and local
levels of government. Of course, in a federal state, as a rule there are major differences in the legal, political, and
economic status of these two levels of subnational government, with regions generally having much more autonomy
in all dimensions. (Bird and Chen (1998) argue that Canada provides an extreme example of differences between these
two sets of intergovernmental relations. In the present paper, however, this distinction is not emphasized.)
6
For an interesting comparison with the subsidiarity principle, see Breton, Cassone, and Fraschini (1998).
7
For a useful recent review of some of the relevant literature on decentralization and redistribution, see Ravaillon
(2000).
4
intergovernmental fiscal transfers are needed to close the budgetary gap.
Certainly, this is the case in both Canada and Russia, although the two cases are of course very different
in many critical respects.

In principle, governments at all levels should be accountable to their citizens for the actions they
undertake, certainly to the extent those citizens finance those actions. Such accountability is the public
sector equivalent of the "bottom line" in the private sector. Four conditions need to be satisfied to
achieve accountability in this sense in subnational finance:

(1) Subnational governments should, whenever possible, charge for the services they provide.8

(2) Where charging is impracticable, sub-national governments should finance such services
from taxes borne by local residents (Section 3), except to the extent that the central government
is, for whatever reason, willing to pay for them through transfers (Section 4).

(3) Where the central government does pay, as a rule sub-national governments should be
accountable to the central government to at least some extent (Section 6), and central
governments should not bail out improvident local governments (Section 5).

(4) Fiscal transparency is necessary both to implement condition (3) and , combined with
mechanisms of democratic accountability, to ensure that conditions (1) and (2) have the effects
they should (Section 6).

None of these rules applies strictly in any country, of course, but it seems fair to say that they
are probably less closely observed in Russia than in any developed federal country. To apply these
rules, for example, an essential first step is to establish clear lines of responsibility and accountability.
As Martinez-Vazquez and Boex (1999) demonstrate in detail, such lines do not in practice exist in the
Russian Federation at present. Although they stress in particular the problem of unfunded mandates, the
problem is much deeper than this since many more expenditure functions are shared than is true in
Canada (Meekison, 2000). Moreover, the lines not only between governments but also between
government, quasi-government, and private activities are exceedingly ambiguous.9

Of course, even if there is clarity of assignment in terms of specifying exactly what services
each governmental agency is responsible for delivering, this is only part of the story. Clarity must be
matched by accountability, in terms of both political democracy and transparency of operation, as well
as by authority in terms of both the ability to manage expenditures and to determine (within limits)
8
The role (and limitations) of user charges are not further considered here: for extensive discussion, see Bird and
Tsiopoulos (1997). In Russia, it appears that fees and charges do not appear in subnational budgetary revenues at all
but are rather simply retained by the collecting agency. This is not good budgetary practice.

9
Although Martinez-Vazquez and Boex (1999) suggest that the recurrent disputes in Canada and other federal
countries such as Germany and Australia over the federal “spending power” are in some sense analogous to the
situation in Russia. My view, however, is that closer examination of the situation in these countries suggests that
the analogy is, at best, tenuous: see Bird (1998) and Watts (1999). (For a somewhat different view, see Meekison,
2000).
5
revenues. Even in the best of all possible worlds full clarity in expenditure assignment in this sense may
never be fully attainable, for two reasons.

First, with respect to many important spheres of public sector activity -- for example, education
-- different jurisdictional levels may play critical roles. 10 A particular service may be "assigned" to a
particular level of government, but much of the relevant policy and regulatory framework, and indeed
much of the financing, may come from higher levels of government -- and the actual service delivery may
be at a lower institutional level. Thus what matters is not so much that each expenditure function,
broadly understood, is clearly assigned to one level of government or another, but rather that it is clear
to all exactly who is responsible for doing precisely what. Unfortunately, as Martinez-Vazquez and
Boex (1999) discuss at length, the present situation in Russia seems particularly deficient in this respect.
Canada is by no means a model of clarity in this sense, particularly at the provincial-local level (Bird
and Chen, 1998) and even the federal-provincial level is not divided into “watertight boxes” (Meekison,
2000), but its expenditure structure is certainly much better structured to facilitate relatively responsible
government than is Russia’s.

Second, clarity in expenditure responsibility does not necessarily imply that someone – usually
taken to be the central government – has to be in charge of coordinating the efforts of others. The
principal argument for decentralization in economic terms is that the central government is not delivering
the goods, or at least not delivering the right goods in the right quantities to the right people. What may
at first glance appear to be undesirable duplication or overlapping of functions may sometimes reflect
either useful redundancy in a complex system or even a certain degree of desirable governmental
competition.11 Nonetheless, the level of confusion as to who is responsible for what to the extent seen
in many policy areas in Russia today suggests that there is indeed a need for better intergovernmental
coordination in that country.

As Dunn and Wetzel (1999) note in a recent review, a general problem with fiscal
decentralization in all transitional countries has been the failure to design intergovernmental fiscal
relations to minimize coordination problems and to establish effective coordinating institutions (Section
6). Despite the high degree of centralization inherent in its fiscal structure, in practice Russia provides
one of the clearest instances of this proposition. It is therefore perhaps understandable that the current
government seems to be attempting a certain degree of recentralization (as did China in its 1994

10
The central government may, for example, appropriately set national standards for graduates and for teachers and
may also establish the basic curriculum to be covered. Regional governments in turn may, within this framework,
develop their own policy goals -- for instance, with respect to school facilities -- and deploy appropriate regulatory
instruments in an attempt to achieve them. Local governments may be responsible for actually paying teachers and
maintaining facilities. And, of course, educational services are finally delivered by schools which will, experience
suggests, produce better outcomes if they have a substantial degree of budgetary autonomy and hence can react to
input from teachers, parents, and the local community. Three or more levels of government may thus play important
roles in delivering educational services, as well as many other public sector activities. In Russia, for example, in sharp
contrast to Canada where education is clearly constitutionally a provincial subject, the federal government, in
accordance with the constitution (Meekison, 2000), sets curricula and textbooks, although most education is supplied
by the regional and especially local authorities.
11
For further discussion of fiscal decentralization and competitive governments, see Breton (1996) and Bird (2000d).
6
reforms).12

Nonetheless, experience suggests that in the long run the correct approach in a country as
diverse as the Russian Federation is unlikely to be to to revert back to, in effect, the discredited central
planning approach of control from above. It is, instead, to establish as hard budget constraints as
possible for all relevant decision-makers and to make the operation of the system as transparent as
possible. "Letting 100 flowers bloom" in the form of relatively uncoordinated decentralized public
sector suppliers striving to meet clearly specified and publicly accountable mandates may, in the end,
provide a better laboratory for the development of new and better public sector services than any
conceivable centralized alternative. Although Canada’s federal-provincial system could be more
transparent than it is and is certainly not without problems, on the whole it does surprisingly well in terms
of establishing the right economic incentives at the margin to induce relatively sensible fiscal behaviour by
the provinces. Interestingly, the much more centralized provincial-local system does no better in this
respect (Bird and Tassonyi, 1999).

Managing Expenditures

No matter where subnational governments get their funds, they are unlikely ever to have enough
to do all they or their citizens want and expect. Successful government requires scarce public funds to
be managed as efficiently and used as effectively as possible. Both financial honesty and political
accountability require budgeting and financial procedures to be properly established and implemented.
Budgeting, financial reporting, and auditing should be comprehensive, comprehensible, comparable,
verifiable, and public. It is equally important, however, to ensure that budgeted resources are applied
as efficiently and effectively as possible to achieve desired public outcomes. Adequate and appropriate
procedural norms are important in any financial system. But substantive outcomes are what really
matter.

Proper public expenditure management should control the total level of revenue and
expenditure, appropriately allocate public resources among sectors and programs, and ensure that
governmental institutions operate as efficiently as possible (World Bank, 1998). With respect to
subnational governments, what is critical in this respect is that they have both incentives and sufficient
authority to manage both the expenditure and revenue sides of their budgets within a consistent and
comprehensive framework.

As emphasized in the next section, it is especially important to ensure that correct incentives
exist on the revenue side. Effective subnational governments must have significant revenue sources, for
which they are economically and politically responsible, under their control. They must also be able to
predict with considerable certainty the intergovernmental transfers that they can anticipate in any
financial period. In contrast to Canada and most developed federations, the current situation in Russia
in both these respects seems highly unsatisfactory as the study by Martinez-Vazquez and Boex (1999)
demonstrates.13
12
See Hayhurst (2000) for a recent account of President Putin’s attempts to reassert central authority over regional
governors. (The Chinese case is discussed in detail in Bahl (1999).)
13
See also the discussion in Open Society Institute (2000).
7
 On the expenditure side, excessive earmarking (like the related process of "mandating"
subnational governments to spend in accordance with central preferences rather than their own)
significantly reduces the scope for effectively managing expenditures by subnational governments, even if
they had both the will and the capacity to do so. As World Bank (1996) shows, this is a major
problem in Russia.14 In these respects, as in others, the Russian Federation’s current fiscal structure
with its “shared” taxes, obscure transfers, and duplicative expenditure roles seems designed to frustrate
rather than facilitate effective subnational government. Similar problems are not unknown at the highly
centralized provincial-local level in Canada (Locke and Tassonyi, 1993).

Subnational budgets, like central budgets, should be comprehensive, accurate, periodic,

authoritative, timely, and transparent. Subnational budget law should be uniform and clear, and it should
be enforced. Moreover, expenditures should be subject to external audit to ensure that the law is
followed. All this would seem to require a strong central hand to ensure that the rules are in place, and
complied with. For example, the central government should establish a "framework" budget law and
require adequate external audit (such as by a private sector firm). It should not, however, require
subnational budgets to be subject to prior approval, or the whole point of decentralization is lost.

On paper, as Meekison (2000) notes, Russia would seem to have in place some of the key
requirements suggested here – apart from its “unitary” budget -- but in practice, as Martinez-Vazquez
and Boex (1999) show, there are many deficiencies arising from “mutual settlements,” inadequate debt
accounting and many other problems.15 Russia clearly has far to go in all these respects compared to
Canada and other developed federal countries.

A consistently applied budgeting and financial system satisfies two essential requirements of
good government. First, it establishes the basis for financial control. Second, it provides accurate,
uniform, and timely financial information. Even the best set of financial procedures, however, does
nothing to ensure that scarce public resources, even if properly spent and accounted for according to
law, have been spent in the best possible way or as efficiently as possible. Nor does even the best-
enforced set of budgetary procedures ensure that aggregate fiscal discipline will be adequately
maintained. To attain favorable outcomes in these respects, additional important fiscal institutions need
to be put in place.

For example, as noted in Section 5 below, it is critical that subnational governments must not be
able to depend on central government "bail-outs" of imprudent financial decisions, such as unsustainable
borrowing or expenditure increases. On the other hand, subnational governments should be able to
increase expenditures to the extent the full fiscal consequences of such increases are borne by local
residents. Equally importantly, they should be able to reduce expenditures.

Allocative efficiency requires that managers at all levels must receive adequate and accurate
information on the effectiveness and social outcomes of the programs for which they are responsible --

14
See Thirsk and Bird (1994) for a review of earmarking in Canada and Bird (1997) for a broader analysis.
15
For a useful recent discussion of the very similar problems in Ukraine, see Szyrmer (2000).
8
for example, through the revenues produced by properly-designed user charges and/or through
participatory interaction with clients at both the budgetary and implementation stages. Moreover, they
must have strong incentives to respond to these signals, for example, by facing a predetermined
spending limit which can be altered only if they can "sell" more services that their client groups are willing
to pay for. Canada clearly has far to go in these respects, but Russia has immeasurably farther.16

3. Revenues

A completely subnational tax is one that is (i) assessed by sub-national governments, (ii) at rates
decided by subnational governments, and that (iii) is also collected by subnational governments, (iv) with
of course its proceeds accruing to subnational governments. In the real world, however, many taxes
may possess only one or two of these characteristics, and the "ownership" of the levy may be unclear.

In Brazil, for example, the states impose and collect their own VATs, but the rate of the tax is
set centrally and (basically) uniformly. On the other hand, in Canada most provinces have traditionally
not levied their own personal income taxes, but rather imposed surcharges on the federal income tax,
with the tax actually being collected by the federal government and remitted to the provinces. As a third
example, in Russia although the VAT base and rates are set centrally, VAT proceeds are shared with
the regional governments on a derivation basis. In fact, as Martinez-Vazquez and Boex (1999) stress,
the VAT (and indeed most other taxes) is actually collected locally and the (variable) federal share is
remitted -- not always in a timely fashion -- to Moscow.

In which of these three cases is subnational tax power the strongest? Theory and experience
suggests that it is in Canada, the only one of the three in which most regional governments do not in fact
collect the tax in question. Why? Because the most critical aspect of subnational taxing power is who is
politically responsible for setting the tax rate.

The central importance of this factor has been neglected in Russia in part because of the carry-
over of the old central planning system of treating all revenues physically collected in a jurisdiction – for
example, because a head office is located there – as “belonging” to that jurisdiction. The city with a
vodka distillery or the region with an oil well, for example, feels that it is “entitled” to all the fiscal
proceeds derived from these sources, even though in economic terms most of the taxes thus collected
are in fact being paid by consumers elsewhere. It is thus common for subnational governments to count

16
There is considerable experience in some parts of the world (including Canada) with such techniques as client
surveys, participatory budgeting, performance budgeting, and user financing. Shifting the emphasis in public
finance from inputs to outputs in this way is in principle an essential step in improving policy outcomes at any level
of government (World Bank, 1998). But the process is clearly risky, not least because it implies a much higher degree
of transparency and clear political responsibility than most governments are willing to assume. No country really
shines in this respect, and it is by no means clear how best, or to what extent, this shift can be accomplished in the
difficult circumstances facing Russia and other transitional countries. While such concerns should likely be foremost
in the minds of those concerned with improving the performance of government in countries such as Canada, with
respect to Russia, which has so many immediately critical problems facing it, such matters are perhaps more for the
future than the present day.

9
all the money flowing from their territory as “their” contribution to the central government and to net
these outflows against explicit federal inflows to assess whether they are gainers or losers in the federal
fiscal game. While such “balance-sheet federalism” is not unknown in Canadian political rhetoric,17 it
simply makes no sense to ignore the real economic incidence of taxes and expenditures, as such
calculations invariably do.

Principles of Revenue Assignment

Two basic principles for assigning revenues to sub-national governments may be suggested.
First, "own-source" revenues – defined as those for which a government is politically clearly responsible
(for example, because it sets the tax rate) -- should ideally be sufficient to enable at least the richest sub-
national governments to finance from their own resources all locally-provided services primarily
benefiting local residents. Second, to the extent possible, sub-national revenues should be collected
only from local residents, preferably in relation to the perceived benefits they receive from local
services. Both of these principles are severely breached in Russia, though roughly approximated in
Canada.

Of course, in any country in which some areas are rich and others are poor, these principles
would of course result in exacerbated regional disparities, so they are normally modified by transfers or
by treating different areas asymmetrically in some other way. Martinez-Vazquez and Boex (1999)
argue that Russia has gone too far in this direction, although others (such as Treisman, 1999) suggest
that what was done may have been essential to national survival. Every federation, however, has some
asymmetry in its fiscal system to some degree in one way or another (Watts, 2000), and, as Bird and
Vaillancourt (2000) demonstrate, Canada is certainly no exception.

The general approach to revenue assignment suggested above derives from two simple ideas.
First, close attention ought to be paid to matching expenditure and revenue needs at different levels of
government. In particular, all governments should bear significant responsibility at the margin for
financing the expenditures for which they are politically responsible. Second, subnational taxes (like all
taxes) should not unduly distort the allocation of resources.

Unless subnational governments have significant freedom to alter the level and composition of
their revenues, neither autonomy nor accountability is meaningful. In particular, as noted earlier,
subnational governments should be able to set tax rates (albeit perhaps within limits). Such rate
flexibility is essential if a tax is to be adequately responsive to local needs and decisions, while remaining
politically accountable to their citizens. On a scale of one to ten, Canada and Russia are almost at
opposite ends with respect to this critical aspect of fiscal federalism at the regional level.

In a democracy, if local electors do not like what their government does, they can (try to) throw

17
Some years ago, for example, there was a well-known “battle of the balance sheets” between the Quebec and
federal governments as to whether federalism was profitable in this sense for Quebec. Surprisingly, even such
reputable analysts as Courchene (1999) have occasionally given some credence to this approach, despite its obvious
inadequacies in economic terms.
10
the rascals out at the next election. The freedom to make mistakes, and to bear the consequences of
one's mistakes, is an important component of local autonomy in any country. Unless local governments
are given some degree of freedom with respect to local revenues, including the freedom to make
mistakes (for which they are accountable to their citizens), the development of responsible and
responsive subnational government is likely to remain an unattainable mirage. Of course, if the essential
conditions of effective democracy and adequate information are not satisfied, or if those who fail to
collect local taxes or to spend revenues efficiently are bailed out by discretionary transfers, the “rascals”
may not be thrown out but rather re-elected for their success in obtaining a larger share of other
people's money. Countries that fail to set up an appropriate intergovernmental fiscal structure in these
respects are, as Russia illustrates, likely to have both problems in managing decentralization and
unsatisfactory policy outcomes.

Subnational governments may of course attempt to extract revenues from sources for which
they are not accountable, thus obviating the basic efficiency argument for their existence. It is thus
desirable to limit the access of such governments to taxes that fall mainly on nonresidents -- such as
most natural resource levies, pre-retail stage sales taxes and, to some extent, nonresidential real
property taxes. The importance of this consideration with respect to natural resource revenues is
stressed with respect to Russia in Wallich (1994), for example, and has frequently also been a matter of
concern in Canada (e.g., Courchene, 1999).

But siimilar problems arise also with many other taxes. Even most so-called “ retail” sales taxes,
for example, fall to a considerable extent on business inputs: In Canada, one study found that up to 50
percent of the retail sales tax base in some provinces consisted of such inputs (Kuo, McGirr, and
Poddar, 1988).18 Similarly, a high proportion of local property taxes levied on businesses are likely
exported to other jurisdictions in Canada (Ballentine and Thirsk, 1982). The critical connection
between spending and revenue-raising is thus broken.

Such concerns seem especially relevant with respect to enterprise taxes (Wallich, 1994) , the
new regional sales taxes in Russia, and even the new property tax which will almost certainly continue to
be collected largely from businesses.19 If inappropriate tax bases are assigned to sub-national
governments, wasteful competition and undesirable tax exporting are likely to result. Such seems to be
the current situation in the Russian Federation, to the extent that the tax situation is clear at all.

One way to deal with such problems to some extent may be to establish a uniform set of tax
bases for local governments (perhaps different for different categories such as big cities, small towns,
and rural areas), with a limited amount of rate flexibility being permitted in order to provide room for
local effort while restraining unproductive competition and unwarranted exploitation. In any case, it is
clear that the present assignment of taxes to regional governments in Russia seems particularly deficient
when compared to Canada, which is almost a polar opposite in this respect.. Not only is there a
significant vertical imbalance between expenditures and revenues, with consequent implications for
autonomy, efficiency, and accountability.20 In addition, the present confused and confusing subnational
18
Ring (1999) shows that the same is true with respect to retail sales taxes in the United States.
19
The new (2000) Russian tax system is described in Alm, Martinez-Vazquez and Wallace (2000).
20
This imbalance is greater than the numbers indicate since, although part of the proceeds of many taxes accrue to
11
tax system results in significant costs — costs of administration, costs of compliance, and costs arising
from tax-induced inefficiencies in the allocation of scarce resources. Since the only real rate authority
that regional governments have in Russia is with respect to potential reductions in the enterprise profits
tax, the potential for distorting tax competition seems particularly high.

Improving Regional and Local Taxes

The most immediately important subnational revenue issue facing Russia is thus to develop a
satisfactory revenue base for regional governments (the “subjects of the federation”), that is, one for
which those governments are politically responsible. While more can likely be done in the form of
regional excise taxes, especially on vehicles and fuels (Bird, 2000c), if regional governments have
significant expenditure responsibilities, there are really only two important revenue sources that can be
levied relatively efficiently at the subnational level. -- a surcharge on the central personal income tax
(PIT) or a surcharge on the central value-added tax (VAT). If a country wants its local governments to
be both large spenders and less dependent on grants, it must provide them with access to national tax
bases. "Piggybacking" through surcharges seems to be the only viable way to do this while retaining an
important element of political accountability.
In Canada, of course, income tax surcharges are a principal source of provincial revenues. In a
sense the same route seemed also to have been chosen in Russia in the 1999 budget, when regions
were empowered to levy a rate of up to 35 percent in addition to the federal PIT rate of 3 percent.
This allocation presumably reflected that fact that, until then, 100 percent of the PIT had gone to the
regions. In 2000, however, the attempt to follow the surtax route was dropped, and 84 percent of PIT
collections was allocated to the regional governments, with the balance to the federal government. In
any case, the income tax itself is far from robust in Russia, so it is by no means clear that the ultimate
answer to regional revenue problems lies in the income tax.21
A potentially more promising alternative answer for subnational revenues may turn out to be a
surcharge on the VAT. Such a tax already exists and works well in Canada (Bird and Gendron,
1998), and it now seems feasible to implement it in some instances even in countries with less well-
developed tax administrations (Bird, 2000b). Although this path to increased responsible regional
taxation in Russia would by no means be straight-forward, it may warrant further exploration. Of
course, with the assignment of all VAT proceeds to the federal government in the 2001 budget proposal
and the new regional sales taxes proposed to replace a number of existing taxes, this route too seems to
have been closed for the time being in Russia.
Turning to local taxes, apart from user charges, there seem to be only two major possibilities -- a
revised, and revived, property tax and some better form of local business taxation. In principle, there is

subnational governments, those governments have little or no say over the rate or base of such taxes, so that from
most perspectives what is going on is really that a central tax is levied and then transferred to the region in which it is
collected. As Martinez-Vazquez and Boex (1999) stress, this is not entirely true since the curious “dual
subordination” of the tax administration in Russia means that the actual collection effort is to some extent responsive
to local as well as national pressures. Nonetheless, structurally, the fact remains that regional governments in Russia
are much more dependent on central tax policy than in Canada.
21
For a recent discussion of the possibilities and problems of local income tax surcharges, see Davey and Peteri
(1998).
12
much to be said for property taxes as a source of local finance. Unfortunately, it is also likely to be
many years before this tax can provide consistent and significant revenues in Russia, as in most
transitional countries, in part since the ownership of much of the potential tax base is still murky.22 Even
if these problems can be overcome, while the property tax is a useful, even a necessary, source of local
revenue, it cannot easily provide sufficient resources to finance a significant expansion of local public
services in most countries. Indeed, many countries have been hard-pressed even to maintain the
present low relative importance of property tax revenues in the face of varying price levels and political
difficulties.23
Major policy reforms are needed to turn the property tax into a responsive instrument of local fiscal
policy in Russia. First, and most importantly, as emphasized earlier, local governments must be allowed
to set their own tax rates, probably within some limits. 24 Secondly, the tax base must be maintained
adequately. Property assessment is both a technical and a controversial matter, and much effort and
considerable resources are required to establish and maintain the tax base. Finally, as with all taxes in
Russia, major procedural reforms are needed to improve collection efficiency, valuation accuracy, and
the coverage of the potential tax base. None of these steps is easy, but there are no short cuts to
successful local property taxation (Kelly, 1994).
A more immediately critical problem in Russia is to reform the various unsatisfactory sub-national
taxes on business. While the ability to distort market conditions through such taxes should, if possible,
be restrained -- for example, by establishing a uniform national base for local business taxation (probaby
with a minimum and maximum rate) -- there is both an economic (benefit) case for some regional and
local taxation of business and, it seems, often an overwhelming political need for local leaders to impose
such taxes. Indeed, given the restrictions on other taxes and the unreliability of central transfers, local
business taxes may sometimes provide almost the only way in which local governments in countries like
Russia are able to expand revenues in response to perceived local needs.
Unfortunately, most forms of local and regional business taxes found around the world -- corporate
income taxes, trade taxes, business taxes, differentially heavy non-residential property taxes, and even
so-called “retail” sales taxes (which are in practice often levied in the form of levies based on estimated
gross receipts) may introduce serious economic distortions. One way to reduce such problems that has
recently been suggested is through imposing a so-called “business value tax” (BVT) – in essence, a
relatively low rate flat tax levied on an income-type value-added base.25 In contrast to the earlier
suggestion of a possible regional VAT surcharge, which was motivated mainly by the desire to provide
more adequate “own” revenues to regional governments and hence to encourage greater fiscal
22
As Martinez-Vazquez and Boex (1999), p. 55, put it: “The lack of real estate markets, land ownership, and multiple
institutional constraints are powerful obstacles for the development of an ad valorem real estate property tax in
Russia.” . For a general discussion of the problems of property taxes in transitional countries, see Kelly (1994).
23
For discussion of Canadian experience, see Bird and Slack (1993).
24.A minimum rate is needed to prevent distorting "tax competition" (with richer jurisdictions -- those with larger tax bases -- lowering
rates to attract still more tax base). A maximum rate is needed to prevent distorting "tax exporting" (as when jurisdictions in which
breweries or gas distribution pipelines are located impose especially heavy taxes on such facilities in the expectation that the taxes will
ultimately be paid by persons not resident in the jurisdiction).

25.The history of this idea, and various partial examples found around the world, are set out in detail in Bird (2000b). Empirical
application of this approach to Canada may be found in Bird and Mintz (2000).

13
responsibility and accountability, the BVT is intended primarily to improve the allocative efficiency of
sub-national revenue systems. A tax on these lines may not find a welcoming political audience in either
Canada or Russia. Nonetheless, such an approach may offer a potentially promising alternative to the
proliferation of increasing, and distorting, sub-national business taxes that otherwise seem likely to lie in
Russia’s future.

4. Transfers

Regardless of the revenue sources made available to subnational governments, transfers from the
central government will undoubtedly continue to constitute an important feature of public finance in
Russia, as in Canada. If subnational governments do not have the fiscal capacity to finance services at
adequate levels, or if there are externalities associated with the services in question, or if a country
wishes to take inter-regional differences in needs into account, transfers are needed. A well-designed
system of intergovernmental transfers inevitably constitutes an essential component of any
decentralization strategy.
No simple, uniform pattern of transfers is suitable for all circumstances. Since transfers reflect
closely the nature of a country's political system, their inherently political nature must be taken into
account without being hamstrung by it. One way to do so that has been suggested is simple, if somewhat
artificial: focus on the effects, rather than on the instruments used to achieve them (Bird, 1993a).
Transfers as such are neither good nor bad. What matters are their effects on such policy outcomes as
allocative efficiency, distributional equity, and macroeconomic stability.
The ideal is thus to "get the prices right" in the public sector by designing transfers so that they do
not weaken the hard budget constraint that exists if local citizens not only determine what services they
get but also have to pay for them (at least at the margin). Even if, as is likely to be the case in Russia for
some years to come, local democracy is neither all that perfect nor all that well-informed, it is still critical
to ensure that transfers do not worsen outcomes by bailing out the incompetent and the irresponsible.
In reality, of course, some transfers are intended primarily to achieve broader political goals, such
as securing and maintaining stability either by rewarding friends or buying off enemies. Such objectives
are by no means unimportant or irrelevant, as Breton (1996) argues in general terms and as Treisman
(1999) has demonstrated for Russia. Nonetheless, from the economic perspective taken here, it is
important to minimize the collateral damage done to efficiency objectives by such "political" transfers.
The Design of Transfers
Three key factors in the design of intergovernmental fiscal transfers are the size of the "distributable
pool," the basis for distributing transfers, and conditionality. An important characteristic of any good
system of intergovernmental grants is stability. Another is flexibility. Three ways to determine how
much money is to be distributed through intergovernmental fiscal transfers are (1) as a fixed proportion
of central government revenues or some other "macro" basis, for example, as a percentage of GDP; (2)
on an ad hoc basis, that is, in the same way as any other budgetary expenditure; and (3) on a "formula-
14
driven" basis -- for instance, as a proportion of specific local expenditures or in relation to some general
characteristics of the recipient jurisdictions. Variants of these methods are found around the world.26
If the central government’s budget is constrained, or if it wishes to maintain maximum political and
budgetary control, the best system from its point of view is one in which the total amount to be
transferred is determined annually in accordance with budgetary priorities. Though the “pool” in Russia
is supposedly set as a percentage of taxation, the annual variations in the percentage (and the taxes
included) appear to reflect such pressures. Under such a system, however, subnational governments
are neither able to budget properly nor do they face an appropriately hard budget constraint.
A better way to provide both some degree of stability to local governments and some degree of
flexibility to the central government may by establishing a fixed percentage of all central taxes (or current
revenues) to be transferred for a period of, say, three years or so. Sharing specific national taxes (such
as VAT) is less desirable than sharing all national taxes because over time central government tax policy
will inevitably become biased, as governments understandably tend to increase more those taxes which
they do not have to share. One reason for the creation of federal surtaxes on Canada’s federal personal
income tax, for example, was because simple rate increases would have automatically increased
provincial taxes – which were imposed as a surtax on “basic” federal tax – as well.
If national taxes are very sensitive to external shocks (such as a fall in export prices), however, the
approach just suggested, although it may still be justified as sharing the pain between levels of
government, may be thought to provide insufficient stability if such vital human capital development
services as education and health are carried out at the subnational level, as is true in both Russia and
Canada. For this or other reasons, it may be desirable either to base the total transferred on a more
stable macro measure such as a moving average of GDP growth -- as is done with respect to the
Canada Health and Social Transfer (CHST) in Canada -- or perhaps to finance such services
separately through a system of capitation grants. While the latter approach would not be acceptable in
Canada, with its long history of provincial “autonomy” in such areas as health and education, it would
seem quite appropriate in Russia given the much stronger role – at least constitutionally – of the federal
level in these important spending areas. 27
A sound transfer system distributes funds among recipient jurisdictions on the basis of a formula.
Discretionary or negotiated transfers are undesirable in principle and have, for example, virtually
disappeared from Canadian practice at the federal-provincial level (Bird, 1987). The essential
ingredients of most formulas for general transfer programs (as opposed to "matching grants" which are
intended to finance narrowly-defined projects and activities) are needs and capacity. Needs may be
roughly proxied as in Canada’s equalization system by population, or some more refined measure might
be used, as in some other countries such as Australia.28 A more difficult problem is to include a

26.See the country discussions in Shah (1994), Ahmad (1996), and Ter-Minassian (1997). Canada’s equalization system foloows the
third approach listed, with the size of the “pool” being determined in effect by the own-revenues collected by a group of provinces.
27
For an example of a grant system along these lines in a unitary, but highly decentralized, setting see Bird and
Fiszbein (1998).

28. The criticisms of the “norms” common in Russian formulas and other problems noted in Martinez-Vazquez and Boex (1999) seems
generally well-taken. Greater refinement need not mean better measures. For further discussion, see Bird, Ebel and Wallich (1995).

15
measure of the capacity of local governments to raise resources, given the revenue authority at their
disposal. Even though, to remain transparent, formulas should not be too complex, any desired degree
of inter-jurisdictional equalization can be build into such a formula.
One way to structure a good transfer system, for example, might be to provide each local
government with sufficient funds (own-source revenues plus transfers) to deliver a (centrally)
predetermined level of services. Because capacity-based transfers are in principle based on measures
of potential revenue-raising capacity (not on actual revenues), no disincentive to fiscal effort is created
by this approach, which is of course that used for equalization in Canada. 29 As experience in many
countries has demonstrated, caution is necessary in introducing refinements since it is all too easy to turn
a simple, transparent formula into an obscure one subject to manipulation.
Once the amount to be distributed has been decided, and the basic distribution formula determined,
the key remaining question is whether the transfer should be made conditional on the provision of certain
services at specified levels. Two approaches may be taken. If the primary objective of transfers is to
ensure that all regions have adequate resources to provide services at acceptable minimum standards,
simple unconditional lump-sum transfers will suffice. This is essentially the practice at the federal-
provincial level in Canada, and it also appears to be the case in Russia (although this is by no means as
clear as it should be). This approach essentially assumes that the fact that the funds flow to locally-
responsible political bodies will ensure sufficient accountability and that it is neither necessary nor
desirable for the central government to attempt to interfere with, or influence, subnational expenditure
choices.
On the other hand, if the central government is, in effect, using subnational governments as agents in
executing such policies as providing primary education at a specified level, then it makes sense to make
the transfer conditional upon the funds actually being spent on education or on the attainment of some
level of educational performance. This approach is common in Canada at the provincial-local level and
seems to be favoured (“targeted grants”) by Martinez-Vazquez and Boex (1999) for Russia. Such
expenditure conditionality ensures that grant funds are spent on the specified service. Of course, since
money is fungible, there is no guarantee that grant funds do not simply displace revenues that would
otherwise have been spent upon the service in question. The extent of such substitution may vary
greatly from service to service (Slack, 1980).
Performance conditionality, which focuses on outputs rather than inputs -- for example, the
proportion of students achieving certain standards rather than the amount spent on education -- has
recently been put forth by some as an alternative. This approach has considerable merit. For example,
it focuses on what is presumably the real policy objective such as education. It also, however, makes
much greater demands on the central government to interpret the inevitably incomplete (and perhaps
biased) information it receives. Experience suggests that, while it is useful to attempt to develop such
indicators, it would be unrealistic in transitional countries such as Russia, in which such attempts are
inevitably reminiscent of the old central-planning system’s reliance on (often capacity-related) “norms,”
to think that the many problems in doing so will soon be solved (Bird and Banta, 2000).

29. For critiques of the Canadian formula, see Bird and Slack (1990) and Smart and Bird (1997). It should perhaps be noted that effort
can be adequately taken into account in a capacity-based formula, although the difficulty of making good “capacity” estimates should
not be understated. A useful recent discussion of this issue in Ukraine may be found in Fiscal Analysis Office (1999).

16
 5. Subnational Borrowing

An interesting aspect of the recent move to decentralize public sector activities in many countries
around the world has been the revival of an old worry - - that sub-national governments, left to their
own devices, will act in a macro-economically "perverse" fashion. The fear is that increased national
transfers will induce subnational governments to cut their own taxes while simultaneously expanding
expenditures both through increased transfers and through "leveraging" increased borrowing on their
new (transfer) revenue base. Subnational deficits, and hence total public sector spending and the overall
public sector deficit, will thus expand. As a result, many transitional countries have imposed controls
over subnational borrowing (Bird, Ebel, and Wallich, 1995) as have many developing countries.
There is reason to be concerned about this problem. In practice, central governments often seem to
provide implicit (if not explicit) guarantees to subnational borrowing. So long as the budget constraint
imposed on governments is not completely hard, they will undoubtedly have some incentive to
misbehave. Some subnational governments may be too economically significant or too politically
important to let them fail. If so, it is indeed necessary to keep the door to the treasury under lock and
key in order to obviate the possibility of local profligacy. Such practices are common even in
developed countries. In Canada, for example, although there are no restrictions on provincial
borrowing, the provinces themselves severely restrict local government borrowing in a number of ways:
the amount of debt, the type of debt instrument, the length of term, the rate of interest, and the use of
debt funds, are all, as a rule, strictly controlled. Some provinces require provincial government approval
before debt is issued; others require the specific approval of local electors. Sometimes the restrictions
are different for different categories of municipalities or for short-term as opposed to long-term debt.
But in no case are local governments allowed to borrow as they wish (Amborski, 1998).
Subnational governments may borrow for many reasons, some more defensible than others. In
some cases, for example, local officials may reap the political benefits of expenditure financed by
borrowing, while leaving the political pain of debt service to their successors. One way to reduce such
behavior might be to prohibit governments from raising their own salaries. Legislatures could of course
vote salary increases for themselves and their officials -- but no such increases could take effect until
after the next election.
In other instances, subnational governments may have been almost forced to borrow (even illegally)
because they are so constrained by central rules that borrowed resources are the only ones they can
freely allocate at the margin in response to constituent demands. Martinez-Vazquez and Boex (1999)
raise this possibility in Russia.
Finally, borrowing may of course be the economically appropriate way to finance capital outlays.
As every public finance textbook notes, in terms of both allocative efficiency and intergenerational equity
it often makes sense to finance long-lived investment projects by borrowing rather than relying solely
upon either current public savings or manna from above (transfers).
There is thus good subnational borrowing as well as bad. It is as important to facilitate the former as
17
to block the latter, not least in countries like Russia that clearly need substantial infrastructure
development. Imposing too strict and arbitrary central limits to subnational borrowing may have
perverse results, in part because debt limits and similar controls raise moral hazard problems precisely
because they prevent market discipline from being applied. Potential lenders to sub-national
governments should reasonably be expected to be sufficiently capable and motivated to find out what
risks they are running with their money. If such loans have received a seal of approval from above,
however, not only are they relieved of this task but also in effect provided with a stronger implicit
guarantee that the central government will back up its judgement than would otherwise exist. The result
may be more risky lending – particularly when, as is the case in some instances in Russia, subnational
governments in some instances in effect control public sector financing institutions.
If a hard budget constraint is to be effectively imposed by capital markets, however, not only must
there be a credible no-bailout rule, but there must also be full transparency so that lenders have full
information on borrowers, and local residents have both full information on the consequences for them
of local borrowing and the ability to influence local decision-makers. To the extent that democracy and
markets work together in bringing about responsible fiscal behavior, the process is likely to take time.
Perhaps, as has been argued with respect to Canada, the hardest budget constraints may be not those
set out in legislation but those forged in the fires of experience (Bird and Tassonyi, 1999). If countries
learn through experience that careful attention needs to be paid to subnational borrowing to avoid
serious problems, then such problems are more likely to be avoided -- whether by redesigning
intergovernmental fiscal relations to reduce the temptation to borrow irresponsibly or by establishing a
set of rules or signals constraining such borrowing. In the end, what may matter more than the specific
solution adopted is the clear recognition of the problem and of the consequences if it is not dealt with
properly. Most mature democracies went through decades, even centuries, of difficulty before working
out the ways in which they presently cope with the potential problems arising from relatively
autonomous sub-national governments. Perhaps Russia can shorten this painful process by learning from
the experience of others, but in the end it will have to follow its own path.
Limits on Borrowing
Although allowing subnational access to capital markets should in the long run strengthen rather
than weaken fiscal discipline, the long run may be quite long. In the interim, it seems sensible in
countries like Russia to limit such access to some extent. One way to do so, for example, would be to
introduce something like the Colombian system of "traffic lights", under which sub-national governments
can borrow freely (green light) when debt is below a specified threshold, but require central approval
(yellow light) when debt levels are higher (Dillinger and Webb, 1998). Another approach may be the
introduction of something like the “Maastricht criteria” of the European Union, under which deficits and
borrowing cannot exceed certain numerical limits.
Given the impossibility of formal bankruptcy proceedings in the public sector, reducing the moral
hazard that will remain in any case requires in addition the institution of a credible review/control system
for debt “work-outs”, perhaps along the lines suggested recently for Argentina (World Bank, 1996a).30

No matter how well intergovernmental fiscal relations are designed, there is likely to remain a

30
For an interesting set of country case studies on these problems, see Rodden,, Eskeland and Litvack (forthcoming).
18
serious short-term problem with respect to those subnational governments which fall into the deficit trap.
Emergency central support may sometimes be needed to resolve such debt problems.31 If so,
however, any such support should carry with it the obligation to introduce and make effective any
necessary reforms under the supervision of a review board.
Special problems may arise from foreign borrowing by subnational governments such as the
Eurobonds issued recently by some jurisdictions in Russia. A sensible precaution might therefore be to
require explicit prior approval from the central government before any such loans may be contracted.32
In any case, to ensure accountability, all subnational borrowing should be reported publicly immediately
and in a transparent fashion so that no government can shift hidden debts onto the next administration
and so that both local voters and the central government can understand more clearly what is going on.
Moreover, since the only good case for local borrowing is to finance capital investment, no borrowing
should be permitted for other purposes, no matter how worthy. 33
To sum up, when there is inappropriate borrowing by subnational governments, the situation
inevitably reflects more basic underlying inadequacies with the intergovernmental fiscal system in general.
Once that system is cleaned up by such measures as, for instance, reassignment of revenues (and
perhaps expenditures), a revised transfer system, the introduction of transparent, timely, and reliable
reporting systems, and the establishment of a stable, accepted periodic review process, unsustainable
subnational borrowing should largely be solved in principle. Of course, as noted above, it may take
considerable time before the problem vanishes in practice, and in the interim certain specific rules and
limits may need to be put into place to reduce the likelihood of undesirable outcomes.
In the end, however, only two basic ex ante limits on subnational borrowing seem needed. First, as
Martinez-Vazquez and Boex (1999) state, borrowing should be permitted only for investment purposes
-- a restriction that may not always be easy to enforce in the absence of strictly segregated and
meaningful capital budgets. Second, explicit national approval should be required for borrowing
abroad. In Russia, however, given the continued dependence of many sub-national governments on
central transfers as well as political realities, somewhat stronger restrictions than these on borrowing
may be warranted for some years – for example, limiting debt service to a small percentage of current
revenues. Certainly, there is little to be said for the relative freedom from control that has existed up to

31.Note that this does not necessarily imply subsidization. In Canada, for example, as a rule the full cost of any needed financial
restructuring is in principle supposed to be borne locally in the form of reduced services for a period of years until the debt is cleared.
The rule is clear: "your mistake, you pay." The central (provincial) government supervises the review and adjustment process, but it
does not subsidize it except very occasionally when the default was clearly beyond the control of the locality (for example, a forest fire
that destroys the resource base of a rural community) so that the problem is one of solvency not liquidity.
32
In Canada, in contrast, until the last decade or so only provincial governments borrowed abroad, with all federal
debt being placed domestically. One possible rationale for this curious situation was that foreign capital markets may
have in effect imposed harder budget constraints on the provinces than might otherwise have been possible,
although this is far from clear.
33.Of course, some arrangements may have to be made to permit borrowing to smooth out cash flows over the
budgetary year. Although some have expressed concern about the ability of local governments to borrow on the
basis of the increased cash flow as a result of transfers (or, for that matter, royalties), it is not clear why this should
be a problem -- provided, of course, that such borrowing is not subsidized. To the extent that transfers constitute
revenues that local governments can spend as they wish, if private agents are willing to lend money based on this
security they should be free to do so, provided, of course that they also bear the consequences if the loan goes bad.

19
now in some cases.
In the long run, unless subnational governments are able to save themselves from fiscal crises by
drawing on their taxing powers, their only options are bankruptcy or bailouts. The fiscal root of this
problem is the limited taxing powers available to sub-national governments that are expected and
required to carry out a much wider range of functions than they can finance on their own without
extensive reliance on central support -- either directly through transfers or, less desirably, indirectly
through bailouts (Eichengreen and von Hagen, 1995). The political root of the problem, however, lies
in the continuing expectation by all players -- citizens, sub-national and national politicians, and lenders -
- that in the end the central government will come to the rescue. So long as central actions, ex post,
reinforce this expectation, ex ante administrative controls on borrowing as requiring prior central
approval or limiting debt service to a certain proportion of current revenues may have to remain in
place.

6. Institutional Aspects

One problem that has bothered many observers in Russia, as in other transitional countries, has
been the apparently poor quality of many subnational administrations. While there is often good reason
for such concern, to a considerable extent countries get the subnational governments they want, and
deserve. Subnational politicians and officials, like those at the central government level, respond to the
incentives with which they are faced. If those incentives discourage initiative and reward inefficiency and
even corruption, it should be no surprise to find corrupt and inefficient local governments. The
appropriate response is to adjust the formal and latent incentive structures affecting local (and central)
decision-makers to make it possible and attractive for honest, well-trained people to make a career in
local government. Given appropriate incentives -- in terms of heightened expectations of improved
services from their constituents and access to resources for which they are politically responsible -- even
very small local governments in poor developing countries have demonstrated significant improvements
in administrative capacity within a relatively short time (Fiszbein, 1997). With the much higher
educational levels and human resources of Russia, similar results should, in principle, be within reach
there also – if conditions are right, which they obviously have not been up to now in many cases.
Accountability and Information
As emphasized earlier, if decentralization is to work properly, those charged with providing local
infrastructure and services must be accountable both to those who pay for such services and to those
who benefit from them -- two groups that may not be identical. Enforcing accountability is not easy. It
requires not only the establishment of an intergovernmental fiscal system that provides clear and correct
incentives to all relevant decision-makers but also the provision of adequate information to local
constituents, as well as the opportunity for them to exercise some real influence or control over the
service delivery system for example, through a democratic political process. In the political and social
circumstances of a country such as the Russian Federation, it will clearly be a considerable challenge to
introduce any significant degree of responsiveness into formal governmental organizations at any level.
20
 Nonetheless, improved accountability in this sense is the key to improved public sector
performance. Improved information is one key to accountability. The systematic collection, analysis,
and reporting of information that can be used to verify compliance with goals and to assist future
decisions is critical to successful decentralization.
Such information is essential both to informed public participation through the political process and
to the monitoring of local activity by the central agencies that are responsible for supervising and
(usually) financing such activity. Unless local "publics" are aware of what is done, how well it is done,
how much it cost, and who paid for it, no local constituency for effective government can be created.
Unless central agencies monitor and evaluate local performance, there can be no assurance that
functions of national importance will be adequately performed once they have been decentralized,
although care must be taken to avoid the use of such information for inappropriate control purposes.
Unfortunately, the lack of an appropriate structure to monitor and support subnational governments
is a common problem in transitional countries (Bird and Banta, 2000). Although obviously
constitutionally restrained to some extent in a federal setting, the national government should nonetheless
in its own interest keep a close eye on the finances of sub-national governments, both in total and
individually. Often, central authorities do not have a very good understanding of either the existing
situation of subnational governments or of the likely effects of any proposed changes in their finance.
Even if, as in Russia, there are uniform financial reporting and budgeting systems, an appropriate agency
-- perhaps preferably one with a certain degree of political separation from the central government –
needs to be made responsible for collecting and processing these data in a timely fashion so that it is
comprehensible to a wider audience. In Canada, for example, this role is played in part by the federal
agency Statistics Canada and in part by the private non-profit agency the Canadian Tax Foundation as
well as by a variety of private and academic commentators. In Ukraine, to some extent the Fiscal
Analysis Office of the Verknovna Rada performs this task.
Of course, different countries have different cultural understandings and political conditions with
respect to the desirable level and nature of accountability. Whatever standards and practices of
accountability are considered desirable, however, formal reporting and evaluation systems inevitably
constitute essential components of any workable accountability system -- whether to users, to local
taxpayers, or to the central government, depending upon the source of financing. In all cases, an
adequate system of collecting and assessing information is required not just for accountability but also,
importantly, to help establish a "public" to whom to be accountable.
Institutionalizing Decentralization
Decentralization is a dynamic process. No country ever gets it right on its first try, or even its
second, or third. Circumstances change, and the nature and design of intergovernmental fiscal relations
should change also. An important aspect of establishing an adequate institutional framework for
decentralization in any country is thus to build in some "error-correction" mechanism, that is, to permit
and encourage the adaptive development and evolution of the system in response to changes in needs
and capacities.
Several possible mechanisms along these lines are suggested by experience around the world:
*One approach, for example, might be to build in "sunset" provisions into any transfer program, that
is, to provide that transfers are subject to renewal in a specified number of years, provided they
21
 pass some kind of independent evaluation of their performance.
*Another approach might be to use the likely need for some centrally-supported access to capital
markets for infrastructure finance not only as a screening device to reject obviously flawed projects
but also an evaluation system to build up "ratings" of local capacity and effort.
*Yet another approach, emphasized above, is to assemble and publicize reliable comparative
information on local government performance.
*Finally, many democratic federal countries – though conspicuously not Canada at the formal
level34--have developed specialized institutions that serve on the one hand to integrate to some
extent the fiscal decisions of governments at different levels and on the other to provide the informed
public with some useful and trustworthy (non-partisan) information on what both levels of
government are doing, separately and together.
More informed and open discussion of these matters than now prevails in most countries is needed.
Regular publication of relevant data would of course help, but one cannot rely solely on an interested
party -- the central government -- to carry out, let alone publish, all the information needed for informed
public discussion. In countries in which intergovernmental fiscal issues are important, consideration might
therefore be given to establishing a small non-governmental research institute focusing on local
government problems.35
Until all relevant actors are better informed of the real alternatives and choices facing them, the
long-run sustainability and outcome of decentralization seems questionable in Russia. Indeed, a move
back towards greater centralization as in China in 1994 (Bird and Chen, 1998a, Bahl 1999) seems not
at all unlikely in the near future, at least as a temporary matter as the central government tries to get its
own finances back under control. This approach may be warranted by the rather chaotic situation now
existing in many respects. As noted earlier, however, it is questionable whether renewed centralization
provides a sustainable long-term answer in Russia’s circumstances.
Achieving Fiscal Transparency
Whether centralized or not, fiscal transparency is fundamental to sound public policy. Such
transparency is needed not only to improve the working of the executive and legislative branches of
government but also to improve the level of public discussion and understanding of policy issues. The
capacity to accept and absorb policy change in the public at large needs to be strengthened in countries
such as Russia in which people have already suffered much from change but do not as yet seem to have
absorbed such basic lessons of economics as that one cannot get something for nothing and that change
is not inevitably a zero-sum game. In general, the more open and transparent the public policy process,
the more likely are policy decisions to be grounded in fact rather than fantasy, and the more policy
outcomes should coincide with stated policy intentions. Such arguments are of course now well
accepted in theory, and to some extent supported by empirical studies and experience in a variety of
countries (Kopits and Craig, 1998, Alt, Lassen, and Skilling, 2000).

34
As Meekison (2000) properly emphasizes, of course, Canada’s “executive federalism” in practice works through a
variety of well-established institutional interchanges between governments.
35
The Open Society Institute in Hungary has done useful work in that country, and elsewhere, along these lines. See,
for example, Horvath (2000).
22
 Of course, fiscal transparency is inherently a difficult concept for many politicians and officials to
accept in any country, whether Canada or Russia. In no country, for example, has any central
government yet admitted that full disclosure (transparent accountability) should apply also to its own
actions as they affect intergovernmental fiscal relations. Decentralization is a two-sided street, and the
central role of central governments in determining the outcome of this complex process needs more
attention than it seems so far to have received. As Breton (1996) argues, however, for the potential
benefits of increased governmental competition to be realized, governments at all levels must become
more transparently comparable and hence accountable for their actions.
The need for transparency, and for more informed public input into, and discussion of, fiscal
matters, is nowhere greater than when the responsibility for governance is divided between two (or
more) tiers or levels of government. Not only do citizens in federal countries need to know exactly who
is responsible for precisely what if they are to hold governments accountable through the electoral
process (or in other ways), but it is also critically important that each level of government be well
informed of the intentions, actions, and outcomes of the other levels. To achieve efficiency in a
decentralized setting, not only must the rules of the game be clear but also all players must have access
to broadly the same information base.
As always, each country deals with these matters in its own way. Nonetheless, experience around
the world suggests that several different roles might be envisaged for a body concerned with
intergovernmental finance issues. Depending upon what is politically desired and feasible, some of these
roles may, or may not, be incompatible and may or may not be combined in the same institution.
One of the most important institutional requirements for effective decentralization is a cadre of
competent fiscal and policy analysts at all levels of government. These persons need to be trained not
only in the mechanics of analysis but in working together, from their different perspectives, towards the
common goal of making the complex political and administrative system work. A possible role for a
special intergovernmental commission or agency, for example, might be to serve as a link between the
political and executive branches in the centre and the regional (and perhaps local) governments -- to
build to at least some extent the “trust” that is so conspicuously missing in Russia today.36 A special
institution might achieve this aim --
(1) by providing a non-partisan forum within which various relevant actors may get to know one
another in a non-confrontational setting; or
(2) by providing a common informational basis to all parties that is (one may hope) trusted by all
parties; or, finally,
(3) by training both formally and informally a cadre of expertise in fiscal and financial areas
Other ways in which an intergovernmental agency might, if desired, serve a formal political role
might be
(1) by making annual or periodic reports on "The State of the Federation"37;
(2) by determining, or reporting on, the appropriate basis for grants;

36
To some extent, this is in part the aim of the Ukraine Fiscal Analysis Office mentioned earlier.
37
In Canada, this is done by the Institute of Intergovernmental Relations at Queen’s University.
23
 (3) by providing "federalism impact statements" indicating clearly the impact on subnational
governments of central actions;38
(4) by working with central banks and departments of finance in developing comparable public
finance data (for example, on borrowing); or
(5) by going further and, like the Australian Loan Council, serving as a formal coordinating
mechanism for public sector borrowing.39
The substantive content of most of the tasks listed might perhaps best be achieved by a body whose
main formal role was educational rather than political. For example, a common accounting framework
could be developed and utilized for monitoring the fiscal performance of all levels of subnational
government. Such reports might be more credible if the agency did not have a formal "reporting" role to
the central government, and its output was accepted as the work of competent and politically neutral
analysts
In the hurly-burly of emerging democratic politics in a country such as the Russian Federation, many
of these suggestions may seem to be either naive or hopelessly idealistic. Nonetheless, for a
decentralized system to work well in a democratic setting, people need to understand not only what is
going on but also the real possibilities and constraints facing governments at all levels
Experience in developed federal countries such as Canada suggests (1) that transparency is needed
for good fiscal management, (2) that good fiscal management is needed if a decentralized political
structure is to work relatively effectively and efficiently, and (3) that some sort of specialized agency (or
agencies) to perform at least some of the functions sketched above may play a vital role in this process.
Good, relevant, timely analysis of intergovernmental fiscal relations, training good analysts, facilitating
and encouraging productive technical exchange between and within governments, and providing neutral,
competent input to the public discussion of intergovernmental fiscal and financial policy -- such
intangible but critical institutional factors in the end play a vitally important role in making decentralization
work in any country. If fiscal federalism in Russia is to prove sustainable and beneficial in the long run,
steps need to be taken to foster the development of such an institutional framework.

7. Conclusion

This paper has covered a wide range of topics. Many of the aspects of intergovernmental fiscal
relations that have been touched on here can of course only be worked out specifically only in the
context of each individual country. The extent to which the ideal structure of intergovernmental fiscal
relations sketched here is currently approximated in Canada, for example, is arguable and clearly
depends upon constitutional restrictions, political realities and an array of specific contextual factors.
Such factors are of course even more salient in Russia, and it will undoubtedly be many years, if ever,
before some of the ideas suggested above are seriously discussed in that country. The real science and

38
This idea is suggested in part by Martinez-Vazquez and Boex (1999) with respect to unfunded mandates.
Something like this has also been proposed in the United States by Inman and Rubenfeld (1998).
39
For a recent discussion of this body, see Courchene (1999).
24
art of designing and implementing better intergovernmental fiscal systems inevitably lies mainly in the
hands of those who must apply these (or other) principles locally.
As Canadians have long known, and Russians are presumably beginning to understand, while good
principles are easy to expound; applying them in practice is much more difficult. Developing a workable
intergovernmental fiscal structure in a federal system is, Canadian experience suggests, a difficult and
never-ending task.
Martinez-Vazquez and Boex (1999), like Dunn and Wetzel (1999) in their wider study of fiscal
federalism in transitional countries, stress the need for a consistent strategy of decentralization in Russia.
They may be right. Canada, like most long-standing federations, has never had such a strategy or
vision. It has instead, as it were, muddled along from crisis to crisis and has somehow managed to
survive so far. It is far from clear, however, that the leisurely, incremental process of change and
adjustment that has characterized Canadian history in this sphere is a luxury that can be afforded in the
current circumstances of the Russian Federation. As always, time will tell.

25
 REFERENCES

Ahmad, Ehtisham, ed. (1996) Financing Decentralized Expenditures: An International

Comparison of Grants (Cheltenham, UK: Edward Elgar).

Alm, James, Jorge Martinez-Vazquez, and Sally Wallace (2000) “Do Tax Amnesties Work? The Case
of Russia,” Paper presented at National Tax Association Meeting, Santa Fe, NM, November.

Alt, James E., David Dreyer Lassen, and David Skilling (2000) “Fiscal Transparency and Fiscal Policy
Outcomes in OECD Countries,” Paper prepared for Conference on European Fiscal Federalism in
Comparative Perspective, Minda de Gunzberg Center for European Studies, Harvard University,
Cambridge, MA, November.

Amborski, David (1998) Review of the Regulatory Environment of Municipal Capital Borrowing
(Toronto: ICURR Press).

Bahl, Roy W. (1999) Fiscal Policy in China: Taxation and Intergovernmental Fiscal Relations
(San Francisco: The 1990 Institute).

Ballentine, J.G. and W. R. Thirsk (1982) Taxation Without Representation: The Consequences of
Taxing Non-residential Property (Ottawa: Canada Mortgage and Housing Corporation).

Bird, Richard M. (1986) Federal Finance in Comparative Perspective (Toronto: Canadian Tax
Foundation).

Bird, Richard M. (1987) “Federal-Provincial Fiscal Transfers in Canada: Retrospect and Prospect,”
Canadian Tax Journal, 35: 118-33.

Bird, Richard M. (1993) “Federal-Provincial Taxation in Turbulent Times,” Canadian Public

Administration, 36: 479-96.

Bird, Richard M. (1993a) “Threading the Fiscal Labyrinth: Some Issues in Fiscal Decentralization,”
National Tax Journal, 46: 207-27.

Bird, Richard M. (1994) “A Comparative Perspective on Federal Finance,” in K.G. Banting, D.M.
Brown, and T.J. Courchene, eds., The Future of Fiscal Federalism (Kingston: School of Policy
Studies, Queen’s University).

Bird, Richard M. (1997) “Analysis of Earmarked Taxes,” Tax Notes International, June 23: 2095-
2116.

Bird, Richard M. (1998) “The Federal Spending Power in International Perspective,” Paper prepared
for Ontario Ministry of Intergovernmental Affairs, December.
Bird, Richard M. (2000) Intergovernmental Fiscal Relations in Latin America: Policy Design and
26
Policy Outcomes (Washington: Inter-American Development Bank).

Bird, Richard M. (2000a) “Intergovernmental Fiscal Relations: Universal Principles, Local

Applications,” Working Paper , International Studies Program, Andrew Young School of Policy
Studies, Georgia State University, Atlanta.

Bird, Richard M. (2000b) "Rethinking Subnational Taxes: A New Look at Tax Assignment," Tax
Notes International, .May 8: 2069-96.

Bird, Richard M. (2000c) "Subnational Revenues: Realities and Prospects," in S.J. Burki and G. Perry,
eds., Decentralization and Accountability of the Public Sector, Annual World Bank Conference on
Development in Latin America and the Caribbean 1999 (Washington: World Bank).

Bird, Richard M. (2000d) “Fiscal Decentralization and Competitive Governments,” in G. Galeotti, P.

Salmon, and R. Wintrobe, eds., Competition and Structure (Cambridge: Cambridge University
Press).

Bird, Richard M. and Susan Banta (2000) "Fiscal Sustainability and Fiscal Indicators in Transitional
Countries," in A. Shapleigh, F. Andic, and S. Banta, eds., Transition Economies and Fiscal Reforms
(Washington: United States Agency for International Development).

Bird, Richard M. and Duanjie Chen (1998) “Federal Finance and Fiscal Federalism: The Two Worlds
of Canadian Public Finance,” Canadian Public Administration, 41: 51-74.

Bird, Richard M. and Duanjie Chen (1998a) “Intergovernmental Fiscal Relations in China in
International Perspective,” in D.J.S. Brean, ed., Taxation in Modern China (New York: Routledge).

Bird, Richard M. and Ariel Fiszbein (1998) “The Central Role of Central Government in
Decentralization: Colombia,” in Richard M. Bird and Francois Vaillancourt, eds., Fiscal
Decentralization in Developing Countries (Cambridge: Cambridge University Press).

Bird, Richard M. and Pierre-Pascal Gendron (1998) “Dual VATs and Cross-Border Trade: Two
Problems, One Solution?” International Tax and Public Finance, 5: 429-42.

Bird, Richard M. and Jack M. Mintz (2000) “Tax Assignment in Canada: A Modest Proposal,” in
Harvey Lazar, ed., Towards a New Mission Statement for Canadian Fiscal Federalism (Montreal:
McGill-Queen’s University Press).

Bird, Richard M. and Edgard Rodriguez (1999) "Decentralization and Poverty Alleviation: International
Experience and the Philippines," Public Administration and Development, 19: 299-319.

Bird, Richard M. and Enid Slack (1990) “Equalization: The Representative Tax System Revisited,”
Canadian Tax Journal, :38: 913-27.

27
Bird, Richard M. and Enid Slack (1993) Urban Public Finance in Canada (2nd ed.; Toronto: John
Wiley & Sons).

Bird, Richard M. and Almos Tassonyi (1999) "Constraining Subnational Fiscal Behavior in Canada:
Alternative Models, Similar Results?" Paper prepared for World Bank, Revised, November.

Bird, Richard M. and Thomas Tsiopoulos (1997) “User Charges for Public Services: Potentials and
Problems,” Canadian Tax Journal, 45: 25-86.

Bird, Richard M. and Francois Vaillancourt (1998) Fiscal Decentralization in Developing Countries
(Cambridge: Cambridge University Press).

Bird, Richard M. and Francois Vaillancourt (2000) “Fiscal Arrangements for Maintaining an Effective
State in Canada,” Paper prepared for Conference at University of Fribourg, Switzerland, April.

Bird, Richard M., Robert D. Ebel, and Christine Wallich, eds. (1995) Decentralization of the
Socialist State (Washington: World Bank).

Breton, Albert (1996) Competitive Governments (Cambridge: Cambridge University Press).

Breton, Albert, Alberto Cassone, and Angela Fraschini (1998) “Decentralization and Subsidiarity:
Toward a Theoretical Reconciliation,” International Journal of Law and Economics, 19: 21-51.

Courchene, Thomas J. (1999) “Subnational Budgetary and Stabilization Policies in Canada and
Australia,” in J.M. Poterba and J. von Hagen, eds., Fiscal Institutions and Fiscal Performance
(Chicago: University of Chicago Press).

Davey, Kenneth and Gabor Peteri (1998) Local Government Finances: Options for Reform
(Nagykovacsi (Hungary): Local Government Know-How Programme).

Dillinger, William and Steven B. Webb (1998) "Decentralization and Fiscal Management in Colombia,"
World Bank.

Dunn, Jonathan and Deborah Wetzel (1999) “Fiscal Decentralization in Former Socialist Economies:
Progress and Prospects,” Paper presented to National Tax Association, October.

Eichengreen, Barry and Juegen von Hagen (1995) "Fiscal Policy and Monetary Union: Federalism,
Fiscal Restrictions, and the No Bailout Rule,"Working Paper C95-056, Center for International and
Development Economics, University of California, Berkeley.

Fiscal Analysis Office, Verkhovna Rada Budget Committee (1999) Budget and Fiscal Review, Third
Quarter and October 1999 (Kyiv, Ukraine).
Fiszbein, Ariel (1997) "Emergence of Local Capacity: Lessons from Colombia," World Development,
25: 1029-43.
28
Hayhurst, David (2000) “The Dictatorship of Law,” Local Government Brief (Open Society
Institute), September.

Horvath, Tamas M., ed. (2000) Decentralization: Experiments and Reforms (Budapest: Local
Government and Public Service Reform Initiative, Open Society Institute).

Inman, Robert P. and Daniel L. Rubenfeld (1997) “Making Sense of the Antitrust State-Action
Doctrine: Balancing Political Participation and Economic Efficiency in Regulatory Federalism,” Texas
Law Review, 75; 1203-99.

Kelly, Roy (1994) “Implementing Property-Tax Reform in Transitional Countries: The Experience of
Albania and Poland,” Environment and Planning C. Government and Policy, 12; 319-32.

Kopits, George and Jon Craig (1998) Transparency in Government Operations, Occasional Paper
No. 158, International Monetary Fund, Washington.

Kuo, C-Y, T. McGirr, and S. Poddar (1988) "Measuring the Non- neutralities of Sales and Excise Tax
in Canada," Canadian Tax Journal, 36: 655-70.

Locke, Wade and Almos Tassonyi (1993) “Shared Tax Bases and Local Expenditure Decisions,”
Canadian Tax Journal, 41: 941-57.

Martinez-Vazquez, Jorge and Jameson Boex (1999) “Fiscal Decentralization in the Russian Federation
during Transition,” Working Paper 99-3, International Studies Program, Andrew Young School of
Policy Studies, Georgia State University, Atlanta.

Meekison, J. Peter (2000) “A Commentary on and Comparison of Fiscal Federalism in Russia with
Fiscal Federalism in Canada,” Paper prepared for Institute of Intergovernmental Relations, Queen’s
University, Kingson, Canada.

Oates, Wallace E. (1972). Fiscal Federalism (New York: Harcourt Brace Jovanovich).

Open Society Institute (2000) Local Government Brief, Public Administration Reform in Russia,
September.

Ravallion, Martin (2000) “Monitoring Targeting Performance when Decentralized Allocations to the
Poor are Unobserved,” World Bank Economic Review, 14: 331-46.

Ring, Raymond (1999) “Consumers’ Share and Producers’ Share of the General Sales Tax,” National
Tax Journal, 52: 79-90.

Rodden, Jonathan, Gunnar Eskeland, and Jennie Litvack, eds. (forthcoming) Decentralization and
Hard Budget Constraints (Washington: World Bank).
29
 Shah, Anwar (1994) The Reform of Intergovernmental Fiscal Relations in Developing and
Emerging Market Economies, Policy and Research Series No. 23, World Bank.

Slack, Enid (1980) "Local Fiscal Response to Intergovernmental Transfers," Review of Economics
and Statistics, 62:364-70.

Smart, Michael and Richard M. Bird (1997) “Federal Fiscal Arrangements in Canada: An Analysis of
Incentives,” in National Tax Association, Proceedings 1996 (Columbus, Ohio).

Szyrmer, Janusz M., ed. (2000) The Barter Economy (Kyiv: Harvard University Ukraine Project).

Ter-Minassian, Theresa, ed. (1997) Fiscal Federalism in Theory and Practice (Washington:
International Monetary Fund).

Thirsk, Wayne R. and Richard M. Bird (1994) “Earmarked Taxes in Ontario: Solution or Problem?” in
A.M. Maslove, ed., Taxing and Spending (Toronto: University of Toronto Press).

Treisman, Daniel (1999) After the Deluge: Regional Crisis and Political Consolidation in Russia
(Ann Arbor: University of Michigan Press).

Wallich, Christine I, ed. (1994) Russia and the Challenge of Fiscal Federalism (Washington: World
Bank).

Watts, Ronald L. (1999) The Spending Power in Federal Systems: A Comparative Study
(Kingston: Institute of Intergovernmental Relations).

Watts, Ronald L. (2000) “Asymmetrical Federalism,” Paper prepared for International Political Science
Association, Quebec, July.

World Bank (1996) Fiscal Management in Russia (Washington).

World Bank (1996a ) Argentina: Provincial Finances (Washington).

World Bank (1998) Public Expenditure Management Handbook (Washington).

30

View publication stats