1. Vojko Obersnel, M.Sc. President of the Association of Croatian Cities
PERSPECTIVES OF LOCAL GOVERNMENT PROVISION AND FINANCING OF DECENTRALIZED SERVICES IN CROATIA
Vojko Obersnel, M.Sc.
President of the Association of Croatian Cities

2. EUROPEAN CHARTER OF LOCAL SELF-GOVERNMENT
– The Croatian Parliament in 1992 adopted the Decision on acceptance and compliance with the principles and the institute of the European Charter of Local Self-government, implemented only since 1 January 1998
Croatia is considered bound by the following provisions (paragraphs) of the Charter:
Constitutional and legal foundation for local self-government
Concept of local self-government
Scope of local self-government (sub-paragraphs 1,2 and 4)
Protection of local authority boundaries
Appropriate administrative structures and resources for the tasks of local authorities
Conditions under which responsibilities at local level are exercised
Administrative supervision of local authorities' activities (sub-paragraphs 1 and 2)
Financial resources of local authorities (sub-paragraphs 1,2 and 3)
Local authorities’ right to associate (sub-paragraphs 1 and 3)
Legal protection of local self-government

3. LOCAL AND REGIONAL GOVERNMENT SYSTEM IN CROATIA
No. of counties City of Zagreb
No. of cities City of Zagreb
No. of municipalities – 426
Association of Cities and Municipalities:
Organization of cities
Organization of municipalities
CROATIAN UNION OF COUNTIES

4. ASSOCIATION OF CITIES AND MUNICIPALITIES
projects and programs
activities
proposals of amendments to Laws
cooperation with USAID
cooperation with EU cities

5. ACHIEVED LEVEL OF DECENTRALIZATION IN CROATIA
primary and secondary schools,
health care,
social welfare,
culture
LARGE CITIES AND COUNTIES in the New Law:
transport in their area
maintenance of public roads,
issuing construction and location permits, other by-laws regarding construction

6. CITIES AND TAXES CITY OR MUNICIPAL TAXES SHARED TAXES
INCOME TAX SURTAX
CONSUMPTION TAX
TAX ON VACATION HOMES
TAX ON COMPANY OR NAME
TAX ON THE USE OF PUBLIC SURFACES
TAX ON IDLE LANDS
TAX ON UNUSED ENTERPRENEURIAL REAL PROPERTY
TAX ON VACATION PLOTS
SHARED TAXES
PROFIT TAX
INCOME TAX
CAPITAL TRANSFER TAX

7. INCOME AND PROFIT TAX
Distribution of realized income tax and surtax and profit tax by level of public authority 38 9 53 34 57 68 4 28 69 3 10 20 30 40 50 60 70 80
2003
2004
Income tax and surtax
Profit tax
state
county
city/municipality
Source: Drezgić Saša, M.Sc., Faculty of Economics Rijeka
Data: Ministry of Finance

8. Population 2003 (thousand) GDP per County (in HRK bil.)
GDP PER COUNTIES IN 2003
County
Population 2003 (thousand)
Total Share in GDP (%)
GDP per County (in HRK bil.)
HRK
GDP p.c.
EUR
Krapina-Zagorje
140.5
2.3
4.4
31,322
4,141
Sisak-Moslavina
182,8
3.3
5.3
34,439
4,553
Karlovac
139.1
2.5
4.7
34,105
4,509
Varaždin
183.2
3.9
7.4
40,576
5,365
Koprivnica-Križevci
123.2
2.7
43,081
5,696
Bjelovar-Bilogora
130.8
4.3
33,456
4,423
Međimurje
118.4
2.1
4.1
34,567
4,570
Zagreb
316.0
10.2
32,202
4,258
City of Zagreb
780.0
31.4
6.1
77,682
10,271
Primorje-Gorski kotar
305.1
8.0
15.5
50,668
6,702
Lika-Senj
53.0
1.3
2.4
45,673
6,038
Zadar
165.8
3.0
5.8
35,001
4,628
Šibenik-Knin
113.6
1.8
3.5
30,379
4,017
Split-Dalmatia
471.00
7.9
15.3
32.568
4,306
Istra
208.6
6.2
12.0
57,757
7,636
Dubrovnik-Neretva
123.9
4.8
36,542
5,096
Virovitica-Podravina
92.2
1.6
33,030
4,367
Požega-Slavonija
85.4
1.4
31,661
4,186
Brod-Posavina
176.2
25,234
3,336
Osijek-Baranja
328.8
5.7
11.0
33,235
4,394
Vukovar-Srijem
202.5
5.2
25,783
3,409
Note: for calculation of GDP per capita the average foreign currency rate in 2003 was used; HR/EUR – 7.56

9. GDP PER COUNTIES IN 2003

10. Title of budgetary revenue
TOTAL REVENUE
Structure of generated revenue of the state, county and city/municipal budget #
Title of budgetary revenue
2003
2004
- mln. HRK % 1
State budget own revenue
38481,0
64.1
40191,1
63.3 2
State budget shared revenue
6597,2
11.0
6749,0
10.6 3
State budget total revenue (1+2)
45078,2
75.1
46940,1
74.0 4
Own county revenue
1440,5
2.4
1450,9
2.3 5
Shared county revenue
989,6
1.6
1125,4
1.8 6
County budget total revenue (4+5)
2430,1
4.0
2576,4
4.1 7
City/municipality own revenue
6241,0
10.4
6648,7
10.5 8
City/municipality shared revenue
6302,9
7281,6
11.5 9
City/municipality total budget rev. (7+8)
12543,9
20.9
13930,3
22.0 10
Total generated revenue (3+6+9)
60052,2
100.0
63446,8
Source: Drezgić Saša, M.Sc., Faculty of Economics Rijeka
Data: Ministry of Finance, Tax Administration

11. TOTAL REVENUE 22% 4% 74% State budget total revenue
County budget total revenue
City/municipality budget total revenue

12. Structure of public expenditures
Structure of public expenditures of European unitary economies
General
public
services
Defense
Public order
and safety
Education
Health-care
Social
Welfare
Housing
sector
Leisure,
culture,
religion
Other C L
Albania (1998) 75 25
100 20 80 70 30 81 19 68 32 65 35 98 2
Bulgaria (2001) 76 24 97 3 41 59 84 16 90 10 38 62 94 6
Croatia (2001) 56 44 99 1 49 51 42 58
Czech Rep. (2001) 54 46 92 8 61 39 95 5 37 63 40 60 78 22
Denmark (2000) 72 28 88 12 45 55 71 29
Estonia (2001) 96 4 33 67 91 9
France (1993) 74 26 23 77 18 82 27 73
Hungary (2000) 36 64 89 11
Ireland (1997) 52 48
Latvia (2001) 93 7
Lithuenia (2001) 79 21
The Netherlands (1997) 86 14 17 83
Poland (2001) 53 47 85 15
Romania (2001)
Russia (2001) 87 13
Slovakia (2001)
Slovenia (2001)
Great Britain (’98)
Source: Drezgić Saša, M.Sc., Faculty of Economics Rijeka; Data: IMF (2002), Government Finance Statistics

13. INDEBTEDNESS OF GENERAL GOVERNMENT
SITUATION WITH DEBT OF THE GENERAL GOVERNMENT –
without granted guarantees as at 31 October 2005
HRK million
% GDP
Central government total debt
84,647.50 38
Extra-budgetary funds total debt
14,616.00
6.6
Local government total debt
1,524.70
0.7
GENERAL GOVERNMENT TOTAL DEBT
100,788.20
45.3
Source: Ministry of Finance, NBS for GDP

14. FISCAL CAPACITY OF CITIES
Comparison of total expenditures of the Croatian local public sector in 2001
Source: Drezgić Saša, M.Sc., Faculty of Economics, Rijeka
Data: Ministry of Finance

15. FISCAL DECENTRALIZATION
increase in own tax revenues
non-tax revenues – in part used as earmarked revenue, and in part for other activities from the self-government scope
borrowing – the level of borrowing to be adjusted to the value of local unit’s assets, i.e. budget capacity
not to set up new units of local government without ensured resources

16. ANALYSIS OF FUNCTIONAL RESPONSIBILITIES OF LOCAL GOVERNMENT AND RECOMMENDATIONS FOR FURTHER DECENTRALIZATION (1)
From the standpoint of local government:
current division of functions is not in compliance with the principle of subsidiarity
some of the basic functional responsibilities prescribed by laws are not appropriately implemented
specific discrepancies and inconsistencies exist, as well as a high level of imbalance of current legislation

17. ANALYSIS OF FUNCTIONAL RESPONSIBILITIES OF LOCAL GOVERNMENT AND RECOMMENDATIONS FOR FURTHER DECENTRALIZATION(2)
CONCLUSIONS:
further transfer of competences for primary schools to cities and large municipalities
transfer of competences of social welfare centers to large and medium-size cities
transfer of concessions for agricultural land to all units of local government
transfer of competences for roads to large and medium-size cities
transfer of the tasks of issuing operating permits for hospitality industry
enhancing the level of adjustment and coordination between the local government and service providers in health-care and social welfare
introducing more equitable distribution of shared profit tax so it is shared to areas where profit was actually generated
introducing a real “Equalization Fund”

18. FINAL CONSIDERATIONS Inadequate level of decentralization
Ratification of other provisions of the European Charter of Local Self-government
There is no developed and strong local government without fiscal decentralization as a precondition for the decentralization of functions
Need to adopt the Law on Local Civil Servants and Employees
Need to set up a Local Government Academy
Direct election of leaders of units of local and regional government