THE WORLD BANK Taxation and Decentralization

Some people have argued that fiscal decentralization may improve welfare not only directly, but also indirectly by helping alleviate such other problems as economic develop-ment, revenue mobilization (see box 1), innovation in public service delivery, accountability of elected officials, capacity development at the local government level, and grassroots participation in governance. What more can one ask? However, to be successful in attaining the potential ben-efits from decentralization, subnational governments must have the power to control their employees, and local resi-dents must have the power to control their governments (normally through elections). Moreover, there must be suf-ficiently accurate information available for voters to evaluate the fiscal decisions of local governments, and sufficient in-centive and interest for them to exercise their power respon