Difficult to conclude formula because every region wants most of the pie Formula decided by the government can be changed frequently The formula has little relation to actual sub-national expenditures Misspending on non-economic projects may rise Revenue-based If all the resources collection by More attractive are collected by than revenue sub-nationals then governments sharing as long much more as only part of revenue will be resource taxation decentralised accrues to e.g. Inequality will specific exceed the production revenue sharing if excise duties all resources are decentralised More likely to The fiscal gap is diffuse separatist bigger under this movements than system; revenue sharing equalisation cannot eliminate it if all resources are decentralised Direct revenue distribution Easy and all Difficult to citizens receive implement in equal share developing countries; these Reduces poverty countries are less bound by rules and It takes some more susceptible money away to corruption from government, It can encourage
Difficult to conclude formula because every region wants most of the pie Formula decided by the government can be changed frequently The formula has little relation to actual sub-national expenditures Misspending on non-economic projects may rise Revenue-based collection by governments More attractive than revenue sharing as long as only part of resource taxation accrues to e.g. specific production excise duties More likely to diffuse separatist movements than revenue sharing If all the resources are collected by sub-nationals then much more revenue will be decentralised Inequality will exceed the revenue sharing if all resources are decentralised The fiscal gap is bigger under this system; equalisation cannot eliminate it if all resources are decentralised Direct revenue distribution Easy and all citizens receive equal share Reduces poverty It takes some money away from government, Difficult to implement in developing countries; these countries are less bound by rules and more susceptible to corruption It can encourage