The Palestinian Economy. Theoretical and Practical Challenges

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Zagha
In summary, what the data show is that that governments in developing countries are
much more centralised than those in industrialised countries, and governments in the
MENA region are even more centralised than the average for developing countries. Local
government is a small part of total government and of national economic activity in the
Middle East region. The Palestinian case shows an average pattern of the Middle East and
North Africa (MENA) region.
4.1.8. Financing of the LGUs
LGUs must have funds available to sufficiently meet their expenditure responsibilities.
Within limits, LGUs should have control over user fees, tax rates and some tax bases.
Typically, there are two main funding sources for LGUs: (1) self-generated revenues
from taxes and/or user fees and (2) central government fund transfers, including any
donor assistance. Revenue assignment to LGUs should help create an appropriate
diversification of funding sources, while at the same time allow for the level of planned
expenditures.
The 1997 LGL leaves LGUs little or no control over the fees and taxes they can
charge. The MoLG must ratify all such fees and taxes before they are put into effect. This
destroys much of the ability of LGUs to match local preferences, capabilities and
willingness to pay. This centralised control by the MoLG also implies that the mix of
taxes and fees is determined from top-down and takes no account of the unique
social/political relationships that exist in each community. Finally, there is no provision
in the law that requires LGUs to set user fees at a level that covers the cost of service or
addresses the possibility of LGU insolvency. The types and weights of various funding
sources utilised by Palestinian LGUs are shown in Table 4.