61 Rethinking local government: Essays on municipal reform - VATT

Local Government in Denmark and the 2007municipal reformAt the regional level, the 2007 reform stripped the old counties ofalmost all their functions, except health care, which has always beentheir most important task. As is also evident from Table 3, health care(hospitals and primary health care by general practitioners) is by farthe most important task for the five Danish regions. In addition, theyare responsible for running specialized social institutions and have acoordinating function in the regional development area.Table 3The functions of municipalities and regions (grosscurrent and capital expenditure, budget 2012)MunicipalitiesMill.DKKPercent Regions Mill.DKKPercentUrban and environmental affairs 13,150 3 Health care 113,268 92Public utilities 9,471 2 Social affairs 4,705 4Traffic and infrastructure 15,422 3Regionaldevelopment3,006 3Education and culture 75,829 17 Administration 1,942 2Health care 26,094 6Social affairs 266,442 60Administration 42,244 9Sum 448,652 100 Sum 122,558 100Source: Statistics DenmarkFinally, the <strong>local</strong> <strong>government</strong> system of finance has remained stablesince the 1970s. Municipal and regional expenditures are financed bydifferent income sources, cf. Table 4. At the municipal level, taxesare the main source of revenue. The most important one is the <strong>local</strong>income tax, and municipalities are free to decide the rate withinthe limits set by the annual agreement between their associationand the central <strong>government</strong>. For many years these agreementshave stipulated that the average municipal tax rate is to be keptconstant, but individual municipalities may adjust their rates upanddownwards. In recent years more and more controls have beenimposed upon <strong>local</strong> taxation, which has led to a considerable lack of50