Financing of Decentralization

Financing of Decentralization

 
Financing of decentralization features prominently in the law to institute the General Code of Regional and Local Authorities.
The enshrining of the principle of free administration of local authorities, underpinned by the affirmation of their administrative and financial autonomy, gives substance to the legal personality of RLAs. Section 11 unequivocally states that « regional and local authorities shall have their own budgets and resources for the management of regional and local interests », in accordance with the arrangements set out below.
Moreover, the law specifies that, « the resources necessary for the exercise of the powers devolved to local authorities shall be allocated to them either by transfer of taxes or grants, or both ».  The taxation transferred refers on the one hand to own local taxes and levies, on which the lawmaker legislated through the Local Taxation Law of 2009, which, with its subsequent amendments, was incorporated into the General Tax Code in its third book. On the other hand, the taxation transfer also refers to transfer of State taxes, whose proceeds are wholly or partially allocated to RLAs.
With regard to allocations, a Common Decentralization Fund for the partial financing of decentralization is instituted. This resource, indexed on a fraction of the annual State revenue that the law sets at a minimum of 15%, appears henceforth as the main source of financing decentralization, in view of the unprecedented evolution resulting from it (Section 25).
In order to provide regional and local authorities with appropriate means for their development in the various fields covered by the devolution of powers, a prior assessment of the burdens involved in their exercise will serve as a basis for the allocation of the corresponding resources.
Special allocations may also be made by the State to regional and local authorities where a shortage of funds is likely to jeopardize the execution of public service missions (Section 26).
Own resources resulting from income-generating activities, proceeds from services, acquisition of holdings, creation of local establishments or companies with public capital, or decentralized cooperation are all financing sources for local authorities which have been laid down by law.