GOLD Report I - UCLG

145ferent weighting given to their incomesources, and in the characteristics of themost important ones. We can for exampledistinguish local finance systems accordingto whether the resource structure is governedby own tax revenue or instead bygrants, including allocations carved fromnational tax revenues. Chart No. 3 comparesthese two types of resources againstthe total resources of local authorities inthe majority of European countries. As inprevious charts, this one takes intoaccount only the local level, usually one ortwo tiers, but three in France and Polandand not the federal entities and autonomousregions. This chart also includes dataavailable on Albania and some states fromthe former Yugoslavia.The chart shows clearly that own tax revenueis greater than the total revenue fromnational tax shares and grants in only eightcountries 15 –Belgium, Denmark, Finland,France, Iceland, Norway, Sweden and Switzerland.In all these countries, the incomefrom own tax revenues comprises morethan 40% of the total for local budgetresources. In the other countries, own taxrevenue falls below 35% as a proportion oftotal resources, except in Albania where itreached 40% after reforms took effect in2005. It rises above 30% only in Greece,Hungary, Luxembourg, Poland and Portugal.But even in these countries the proportionof grants and national tax sharesrepresents a much higher percentage ofresources (except in Luxembourg).Analysis suggests that there are indeed differencesamong the various local financesystems that operate with between 30%and 40% of resources coming from own taxrevenues. Such resources are greater thanthose from grants and shared taxes. Whenthese two conditions are met, it can be saidthat the resource system is governed bylocal taxation. Grants then have the role ofproviding a basic source of funds or of fundequalization, or of offsetting costs prescribedby the law. The own tax revenue isenough to allow local authorities to establishtheir own fiscal policies. Conversely, in thecountries where own tax revenue is considerablylower than income from grants ortax shares, and is considerably lower than30% of total resources, it can be said thatsuch resource systems are governed bygrants. In this case, own tax revenue theoreticallyhelps fund non-mandatory expenditures,such as those for discretionarytasks, or helps pay for costs that are insufficientlycovered by grants and tax-sharerevenues. But the lower own tax revenue isas a proportion of total resources, the moredifficult it is in political terms to raise extraresources because a significant increase inresources necessarily implies a significantincrease in tax rates. This political aspectmay change where the central governmentputs pressure on local authorities to raiselocal taxes or cut expenditure by rationingbudgetary transfers and national tax shares.However, connection charges and userfees paid locally for services can providealternative non-tax resources, especially atthe local council level. Increases in local servicecharges and ancillary fees are apt to beaccepted more easily than higher taxes. Afinal point on this matter: in the central andeastern European countries, property revenues(income from alienation or licensing)can continue to play an important role andto increase the proportion of local resourceskept under the control of local authorities;this is only a transitional situation, but it isjust what is needed to facilitate transition.b) Own local tax revenueAs far as the structure of own taxation isconcerned, there are several observationsworth consideration. All countries exceptSweden collect property tax, and this tax isgenerally held to be the most appropriateone for local taxation because of the localizationof the tax base. This view is sharedby most governments throughout theworld. But this tax is dependent on theexistence of a fully-functioning land register.As yet no such system functions properlyin the Central and Eastern Europeancountries, some of which have no registerIn only eightcountries is ownrevenue greaterthan the totalrevenue fromnational tax sharesand grants, and isin excess of 40% ofthe total revenue15. Lithuania is notincluded as thereare clearly errors inthe statisticalclassification of theirresources: in 2002,the local taxrevenue of localauthorities did notexceed 8.4% of thetotal of theirresources (G.Marcou, Lesstructuresrégionales dans lespays candidats etleur compatibilitéavec les fondsstructurels (Europecentrale etorientale) [Regionalstructures inapplicant countriesand theircompatibility withthe structural funds(central and easternEurope)],Luxembourg,Parlement européenSTOA 105 FR, 2002,[Part B: countryfiles]).