Fiscal decentralisation in Lithuania in the context of EU countries

Abstract

The paper analyses the key theoretical and legal aspects of the concept of fiscal decentralisation; on the basis of statistical and legal documents it examines the situation of fiscal decentralisation in Lithuania and compares the key indicators of this situation with corresponding indicators of other European Union states. The present research ascribes EU states to five levels of fiscal decentralisation according to 3 features: local taxes, expenses, and subsidies. Fiscal decentralisation is geared towards increasing financial independence and responsibility of the local self-government. However, it can have such negative consequences as corruption, greater social fragmentation and influence of various interest groups. The level of fiscal decentralisation in the state is indicated by the percentage of municipal expenses of the GDP and percentage of the total expenses of the public sector. The present research has demonstrated that fiscal decentralisation indicators are highest in the old-timer EU states (Sweden, Finland, Germany, France), which have strong local self-government and long-time democratic traditions. Lithuania can be ascribed to the countries with medium fiscal decentralisation.