Draft for Comment

Draft for Comment Subnational Tax Policy Design and Fiscal Decentralization The World Bank Course on Practical Issues of Tax Policy in Developing Countries 1Robert D. Ebel I. Introduction and Context Why Local Tax Policy Matters St1. The World Development Report on Entering the 21 Century reaches the dramatic conclusion that two forces shape the world in which development policy will be defined and implemented: globalization (the continuing integration of the countries of the world) 2and localization (self-determination and the devolution of power . , WDR, 1999-2000). What is labeled as localization elsewhere is often cited as decentralization--the division 3of public sector functions among multiple types of government: central and subnational. This decentralization can, and is, occurring in unitary and federal states alike. 2. The sorting out of fiscal power has been occurring even in inherently centralized” countries, such as the Kingdoms of Jordan and Morocco (Ebel, Fox and Melhem, 1995; Vaillancourt, 1997; Yilmaz, Fox and Ebel, 2003), Central and Eastern Europe states that are in the transition from a command to market economy (Dunn and Wetzel, 2000; Bird, Ebel and Wallich, 1995; Wong and Martinez-Vazquez, 2002), military regimes (Shah, 1996; Pakistan NRB, 2001); countries that view decentralization as a strategy for improving local service delivery in reaction to financial crises (Thailand; Weist 2000); nation-states that ...