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Unformatted text preview: urther. This principle is known as either the
decentralization principle5 or the subsidiarity principle.6 But decentralization of responsibilities without an allocation of
sufficient financial resources (or access to sufficient financial resources) would not allow the full realization of the
benefits of decentralization. There must be a matching between spending and revenue. This can be obtained in two
fundamentally different ways, i.e. through own-source revenue (in which case the federated states are said to have fiscal
autonomy) and through transfer revenue from the federal government (in which case they enjoy financial autonomy if the
transfers are unconditional). 1 2
4 5 6 The expression “levels of government” is appropriate in the context of non-federal countries. The terms “central”, “regional” and “local” in this case
designate the three major levels. In the case of a federation, we speak of “orders of government”. Each order is sovereign in its fields of jurisdiction
and accordingly is not subordinate, in these areas, to any other. In Canada, the terms “federal order”, “provincial order” and “local level” are used
since the municipal level is subordinate, constitutionally, to the provincial order.
There are currently 23 federations in the world. Ronald Watts (1999) adds Spain to this list.
Only professor Albert Solé, of the University of Barcelona, was unable to send us a text. He had agreed, at the last minute, to replace a speaker who
was unable to attend and planned to use manuscript notes for his presentation.
A distinction should be made between federalism and territorial administrative decentralization, in which the division of jurisdictions or of tasks
between the central and territorial authorities is not constitutionalized and may, consequently, be amended at the discretion of the central authorities.
The term “decentralization” in the present document refers to the notion of federalism unless it is clear, from the context, that the other meaning is
Robert Ebel notes (see p. 145 of the present document) the classic formulation of this principle, attributable to Wallace Oates, author of the major
work Fiscal Federalism in 1972: “each public service should be provided by the jurisdiction having control over the minimum geographic area that
would internalize benefits and costs of such provision”.
The texts give many definitions of this principle. We will return to this later. 1 Commission on Fiscal Imbalance From the outset, some terminological clarification is needed. The framework of analysis for fiscal federalism used here
refers to two separate situations, depending on whether the country in question has a non-federal system of government
with many levels or a federal structure. In terms of analysis, there is an essential difference between non-federated
countries and federations. In the former case, regional and local administrations are agents of the central power. By
contrast, a federal structure implies the presence of orders of government that are, in a sense, “side...
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