Intergovernmental fiscal transfers in Ethiopia: challenges and some options (a comparative study)

Intergovernmental fiscal transfers in Ethiopia: challenges and some options (a comparative study)

It is a boldly held view that the revenue assignment problem in a federal set up is less challenging than problems witnessed in intergovernmental fiscal transfers from the federal to state governments. The issue of challenges to intergovernmental transfer system and possible alternatives of avoiding them did not, however, attract much attention in Ethiopia as they deserve. This paper is then especially targeted to fill the gap in that regard. 

The paper argues that the prevalent vertical fiscal imbalance of the states in Ethiopia could not only be rectified through fiscal transfers and we should sought some other options to empower the fiscal capacity of the states such as bridging the gap between revenue potential and actual revenue of the states, revisiting the FDRE constitution (including the concurrent jurisdiction) to win more tax jurisdictions to the states, and enhancing their role at least in revenue sources exclusively assigned to them.