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PERSPECTIVES OF LOCAL GOVERNMENT PROVISION AND FINANCING OF DECENTRALIZED SERVICES IN CROATIA. Vojko Obersnel, M.Sc. President of the Association of Croatian Cities. EUROPEAN CHARTER OF LOCAL SELF-GOVERNMENT. - PowerPoint PPT Presentation
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PERSPECTIVES OF LOCAL GOVERNMENT
PROVISION AND FINANCING OF DECENTRALIZED
SERVICES IN CROATIA
Vojko Obersnel, M.Sc.
President of the Association of Croatian Cities
EUROPEAN CHARTER OF LOCAL SELF-GOVERNMENT
– The Croatian Parliament in 1992 adopted the Decision on acceptance and compliance with the principles and the institute of the European Charter of Local Self-government, implemented only since 1 January 1998 Croatia is considered bound by the following provisions (paragraphs) of the Charter:
• Constitutional and legal foundation for local self-government• Concept of local self-government• Scope of local self-government (sub-paragraphs 1,2 and 4)• Protection of local authority boundaries• Appropriate administrative structures and resources for the tasks of
local authorities• Conditions under which responsibilities at local level are exercised• Administrative supervision of local authorities' activities (sub-
paragraphs 1 and 2)• Financial resources of local authorities (sub-paragraphs 1,2 and 3)• Local authorities’ right to associate (sub-paragraphs 1 and 3)• Legal protection of local self-government
LOCAL AND REGIONAL GOVERNMENT SYSTEM IN
CROATIA
• No. of counties - 20 + City of Zagreb• No. of cities -123 + City of Zagreb• No. of municipalities – 426
• Association of Cities and Municipalities:– Organization of cities– Organization of municipalities
• CROATIAN UNION OF COUNTIES
ASSOCIATION OF CITIESAND MUNICIPALITIES
• projects and programs• activities• proposals of amendments to
Laws• cooperation with USAID• cooperation with EU cities
ACHIEVED LEVEL OF DECENTRALIZATION IN
CROATIA• primary and secondary schools,• health care,• social welfare,• culture
LARGE CITIES AND COUNTIES in the New Law:• transport in their area• maintenance of public roads,• issuing construction and location permits,
other by-laws regarding construction
CITIES AND TAXESCITY OR MUNICIPAL TAXES • INCOME TAX SURTAX• CONSUMPTION TAX • TAX ON VACATION HOMES• TAX ON COMPANY OR NAME• TAX ON THE USE OF PUBLIC SURFACES• TAX ON IDLE LANDS• TAX ON UNUSED ENTERPRENEURIAL REAL PROPERTY• TAX ON VACATION PLOTS
SHARED TAXES • PROFIT TAX• INCOME TAX• CAPITAL TRANSFER TAX
INCOME AND PROFIT TAXDistribution of realized income tax and surtax and profit tax by level of public authority
Source: Drezgić Saša, M.Sc., Faculty of Economics RijekaData: Ministry of Finance
38
9
53
34
9
57
68
4
28
69
3
28
0
10
20
30
40
50
60
70
80
2003 2004 2003 2004
Income tax and surtax Profit tax
state
county
city/municipality
GDP PER COUNTIES IN 2003
Note: for calculation of GDP per capita the average foreign currency rate in 2003 was used; HR/EUR – 7.56
County Population 2003 (thousand)
Total Share in GDP (%)
GDP per County (in HRK bil.)
HRKGDP p.c.
EURGDP p.c.
Krapina-Zagorje 140.5 2.3 4.4 31,322 4,141
Sisak-Moslavina 182,8 3.3 5.3 34,439 4,553
Karlovac 139.1 2.5 4.7 34,105 4,509
Varaždin 183.2 3.9 7.4 40,576 5,365
Koprivnica-Križevci 123.2 2.7 5.3 43,081 5,696
Bjelovar-Bilogora 130.8 2.3 4.3 33,456 4,423
Međimurje 118.4 2.1 4.1 34,567 4,570
Zagreb 316.0 5.3 10.2 32,202 4,258
City of Zagreb 780.0 31.4 6.1 77,682 10,271
Primorje-Gorski kotar 305.1 8.0 15.5 50,668 6,702
Lika-Senj 53.0 1.3 2.4 45,673 6,038
Zadar 165.8 3.0 5.8 35,001 4,628
Šibenik-Knin 113.6 1.8 3.5 30,379 4,017
Split-Dalmatia 471.00 7.9 15.3 32.568 4,306
Istra 208.6 6.2 12.0 57,757 7,636
Dubrovnik-Neretva 123.9 2.5 4.8 36,542 5,096
Virovitica-Podravina 92.2 1.6 3.0 33,030 4,367
Požega-Slavonija 85.4 1.4 2.7 31,661 4,186
Brod-Posavina 176.2 2.3 4.4 25,234 3,336
Osijek-Baranja 328.8 5.7 11.0 33,235 4,394
Vukovar-Srijem 202.5 2.7 5.2 25,783 3,409
GDP PER COUNTIES IN 2003 31.6%
31.4%
8.0%7.9%6.2%
5.7%
5.3%
3.9%
City of Zagreb Primorje-G.kotarSplit-Dalmatia IstriaOsijek-Baranja ZagrebVaraždin Other
TOTAL REVENUEStructure of generated revenue of the state, county and city/municipal budget
Source: Drezgić Saša, M.Sc., Faculty of Economics RijekaData: Ministry of Finance, Tax Administration
# Title of budgetary revenue 2003 2004
- mln. HRK
% - mln. HRK
%
1 State budget own revenue 38481,0 64.1 40191,1 63.3
2 State budget shared revenue 6597,2 11.0 6749,0 10.6
3 State budget total revenue (1+2) 45078,2 75.1 46940,1 74.0
4 Own county revenue 1440,5 2.4 1450,9 2.3
5 Shared county revenue 989,6 1.6 1125,4 1.8
6 County budget total revenue (4+5) 2430,1 4.0 2576,4 4.1
7 City/municipality own revenue 6241,0 10.4 6648,7 10.5
8 City/municipality shared revenue 6302,9 10.5 7281,6 11.5
9 City/municipality total budget rev. (7+8) 12543,9 20.9 13930,3 22.0
10 Total generated revenue (3+6+9) 60052,2 100.0 63446,8 100.0
TOTAL REVENUE
74%
4%
22%
State budget total revenue
County budget total revenue
City/municipality budget total revenue
Structure of public expendituresGeneralpublicservices
Defense Public orderand safety
Education Health-care SocialWelfare
Housingsector
Leisure,culture,religion
Other
C L C L C L C L C L C L C L C L C L
Albania (1998) 75 25 100 0 100 0 20 80 70 30 81 19 68 32 65 35 98 2
Bulgaria (2001) 76 24 100 0 97 3 41 59 84 16 90 10 38 62 70 30 94 6
Croatia (2001) 56 44 100 0 98 2 84 16 99 1 99 1 49 51 42 58 81 19
Czech Rep. (2001) 54 46 100 0 92 8 61 39 98 2 95 5 37 63 40 60 78 22
Denmark (2000) 72 28 100 0 88 12 54 46 5 95 45 55 71 29 46 54 84 16
Estonia (2001) 72 28 100 0 96 4 33 67 97 3 91 9 0 100 54 46 88 12
France (1993) 74 26 92 8 23 77 63 37 98 2 91 9 18 82 27 73 84 16
Hungary (2000) 60 40 100 0 91 9 36 64 54 46 89 11 27 73 55 45 95 5
Ireland (1997) 92 8 100 0 0 100 78 22 52 48 94 6 30 70 51 49 84 16
Latvia (2001) 44 56 100 0 94 6 28 72 95 5 93 7 16 84 41 59 91 9
Lithuenia (2001) 79 21 100 0 97 3 32 68 99 1 90 10 0 100 61 39 91 9
The Netherlands (1997)
71 29 100 0 75 25 67 33 95 5 86 14 21 79 17 83 82 18
Poland (2001) 55 45 100 0 53 47 28 72 7 93 94 6 29 71 29 71 85 15
Romania (2001) 68 32 100 0 97 3 44 56 100 0 94 6 29 71 52 48 88 12
Russia (2001) 71 29 100 0 78 22 18 82 12 88 87 13 3 97 26 74 58 42
Slovakia (2001) 80 20 100 0 95 5 100 0 100 0 100 0 36 64 75 25 94 6
Slovenia (2001) 79 21 99 1 94 6 77 23 99 1 99 1 35 65 54 46 81 19
Great Britain (’98) 78 22 100 0 48 52 33 67 100 0 80 20 59 41 41 65 87 13
Structure of public expenditures of European unitary economies
Source: Drezgić Saša, M.Sc., Faculty of Economics Rijeka; Data: IMF (2002), Government Finance Statistics
INDEBTEDNESS OF GENERAL GOVERNMENT
HRK million % GDP
Central government total debt 84,647.50 38
Extra-budgetary funds total debt 14,616.00 6.6
Local government total debt 1,524.70 0.7
GENERAL GOVERNMENT TOTAL DEBT 100,788.20 45.3
SITUATION WITH DEBT OF THE GENERAL GOVERNMENT – without granted guarantees as at 31 October 2005
Source: Ministry of Finance, NBS for GDP
FISCAL CAPACITY OF CITIES
0
1000
2000
3000
4000
5000
6000
7000
8000
općine gradovi županije
0,0
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0iznosizdataka (umil. kn)
udio uukupnimizdacimanižih razinajavne vlasti(%)
Comparison of total expenditures of the Croatian local public sector in 2001
Source: Drezgić Saša, M.Sc., Faculty of Economics, RijekaData: Ministry of Finance
FISCAL DECENTRALIZATION
a) increase in own tax revenuesb) non-tax revenues – in part used as
earmarked revenue, and in part for other activities from the self-government scope
c) borrowing – the level of borrowing to be adjusted to the value of local unit’s assets, i.e. budget capacity
d) not to set up new units of local government without ensured resources
ANALYSIS OF FUNCTIONAL RESPONSIBILITIES OF LOCAL
GOVERNMENT AND RECOMMENDATIONS FOR FURTHER DECENTRALIZATION (1)
From the standpoint of local government:
• current division of functions is not in compliance with the principle of subsidiarity
• some of the basic functional responsibilities prescribed by laws are not appropriately implemented
• specific discrepancies and inconsistencies exist, as well as a high level of imbalance of current legislation
ANALYSIS OF FUNCTIONAL RESPONSIBILITIES OF LOCAL GOVERNMENT AND
RECOMMENDATIONS FOR FURTHER DECENTRALIZATION(2)
CONCLUSIONS:• further transfer of competences for primary schools to cities and large
municipalities• transfer of competences of social welfare centers to large and medium-
size cities• transfer of concessions for agricultural land to all units of local
government• transfer of competences for roads to large and medium-size cities• transfer of the tasks of issuing operating permits for hospitality industry• enhancing the level of adjustment and coordination between the local
government and service providers in health-care and social welfare• introducing more equitable distribution of shared profit tax so it is
shared to areas where profit was actually generated• introducing a real “Equalization Fund”
FINAL CONSIDERATIONS1. Inadequate level of decentralization2. Ratification of other provisions of the
European Charter of Local Self-government3. There is no developed and strong local
government without fiscal decentralization as a precondition for the decentralization of functions
4. Need to adopt the Law on Local Civil Servants and Employees
5. Need to set up a Local Government Academy6. Direct election of leaders of units of local and
regional government