By Zemenu Yesigat
Constitutional and Public Law, Addis Ababa University, Addis Ababa, Ethiopia
Image Attribute: Photo courtesy Petterik Wiggers / WFP / U.S. Embassy Addis Ababa via Flickr creative commons
Fiscal Federalism
Fiscal
federalism covers matters involving constitutional arrangements that assign
expenditure responsibilities and revenue raising capacities, as well as the
mechanisms for adjusting horizontal and vertical imbalances. Fiscal federalism
is, therefore, a study of the allocation of legislative and executive
responsibilities as well as taxation powers among different layers of a
government.
Expenditure
responsibility can be discerned from in the division of legislative and
executive powers among different tiers of a government in a federal system.
Likewise, there are allocations of exclusive as well as shared and residual
powers of legislation in the Federal Democratic Republic of Ethiopia (FDRE) Constitution.
For instance, apart from reserving residual powers for States, the Constitution
bestows them with powers to make or amend their respective constitutions as
well as to issue and implement socioeconomic development policies, strategies
and plans. Shared powers in the Ethiopian federal system could appear either in
the form of concurrency or framework powers.
As
a general rule, the FDRE Constitution adopts a dual model of allocating
legislative and executive powers. As per article 50(2), both tiers of
government have legislative and executive powers on matters that fall under
their respective jurisdictions. The division of expenditure responsibilities in
the Ethiopian federal system, in principle, corresponds with the allocation of
legislative powers.
The
division of revenue powers among the various tiers of government is one of the
pillars of a federal arrangement. Generating revenues for execution of
expenditure responsibilities as well as playing a vital role in macroeconomic
regulation fall under the manifold functions of taxation powers(Watts, 2008). Recognized as an
indispensable element of a federal system, allocation of revenue powers holds a
significant place in the FDRE Constitution. It stipulates the division of
taxation powers under different titles; these are the federal and States’
exclusive powers of taxation as well as concurrent and residual (un-designated)
areas of taxation (Articles 96-99 of FDRE Constitution).
In
addition, the procedures and institutions ensuring vertical or horizontal
transfers are the subject matter of the discipline. Also, procedures,
institutional setups ensuring sub-national borrowings, in particular, and the
issue of stabilization and management of economy, in general, are also the
subject matters of fiscal federalism.
Subnational Fiscal Autonomy-Redefined
Whether
it is adopted for the economic rationales of efficiency, equity and
accountability, or employed as a response to ethno-cultural or political claims
of self-determination, decentralization measures should ideally guarantee the
financial autonomy of constituent units. It is financial capacity of
sub-national governments that is a determining factor in the effective
implementation of constitutionally mandated expenditure responsibilities and
the execution of local policies and priorities.
Significant
discrepancy among scholars aside, fiscal autonomy is considered to be the most
important measure of sub-national financial autonomy. Fiscal autonomy deals with
tax autonomy thereby delineating the share of own-source revenue from the total
sub-national revenue. For this reason, the power to levy taxes (tax autonomy) is
the fundamental attribute of fiscal autonomy since it is such power that
distinguishes autonomous (own-source) revenues from other types of revenue.
Basically, fiscal autonomy is equated with the ability of constituent units to
access resources independently, including sub-national discretion over tax
bases and tax rates (Blöchliger & Rabesona, 2009). Moreover, fiscal autonomy
allows regional governments to decide the size of their autonomous revenues.
For
instance, in the section dealing with division of powers between the federal
and regional governments, the FDRE Constitution dictates the general principle
for levying and collecting taxes from their respective revenue sources (Art
51/10 and 52/2/e of the FDRE Constitution). Both tiers of the government have
the autonomy to administer taxes that fall under their exclusive jurisdiction.
Hence, it is possible to say that the Constitution envisaged sub-national fiscal
autonomy, at least in relative terms.
Therefore,
it is necessary to look into the autonomy in generating revenues as well as the
volume of such revenues while studying the fiscal autonomy of State
governments. Generally speaking, the sub-national fiscal autonomy of sub-national
governments is principally linked with their power and capacity to levy and
collect the revenue that is required for meeting their expenditure needs.
About the Author:
Zemenu Yesigat
Haramaya University, Dire Dawa, Ethiopia
Constitutional and Public Law, Addis Ababa University, Addis Ababa, Ethiopia
College of Law, Dire Dawa University, Dire Dawa, Ethiopia
Publication Details:
This article is an excerpt from a technical paper, titled - "Subnational Fiscal Autonomy in a Developmental State: The Case of Ethiopia" published at Beijing Law Review, Vol.07 No.01(2016), Article ID:64304,9 pages DOI: 10.4236/blr.2016.71005.
About the Author:
Zemenu Yesigat
Haramaya University, Dire Dawa, Ethiopia
Constitutional and Public Law, Addis Ababa University, Addis Ababa, Ethiopia
College of Law, Dire Dawa University, Dire Dawa, Ethiopia
Publication Details:
This article is an excerpt from a technical paper, titled - "Subnational Fiscal Autonomy in a Developmental State: The Case of Ethiopia" published at Beijing Law Review, Vol.07 No.01(2016), Article ID:64304,9 pages DOI: 10.4236/blr.2016.71005.
Copyright © 2016 by author and Scientific Research Publishing Inc.
This work is licensed under the Creative Commons Attribution
International License (CC BY).