FUNCTIONAL RETHINKING OF THE LOCAL FISCAL MODEL: RESOURCE, RESPONSIBILITY AND FAIRNESS

Abstract

European Union policies aimed at strengthening local self-government and advancing fiscal decentralisation place sustained emphasis on expanding the functions and financial resources of local authorities. The debate on fiscal autonomy, however, remains focused mainly on additional revenue sources, including the sharing or assignment of national tax revenues, while giving less attention to how effectively municipalities mobilise their existing own-source revenue potential and to the proper sequence of functional and fiscal decentralisation. This study proposes a functional rethinking of the local fiscal model based on the principle that an assigned function precedes and justifies the resources required for its performance, while the provision of public resources entails measurable responsibility for their effective management. Bulgaria serves as the empirical setting for assessing the capacity of local authorities to transform revenue powers into actual financial resources. The analysis covers the three principal local revenue sources - recurrent tax on immovable property, motor vehicle tax and the municipal solid waste fee - and examines both the realisation of assessed revenue potential and public receivables lost through statutory limitation. The results indicate insufficient efficiency in revenue mobilisation, with a substantial gap between assessed public receivables and revenue actually collected. Part of the unrealised potential becomes time-barred and is irreversibly lost as a public resource. Thus, the formal existence of revenue powers does not ensure their effective implementation, and additional funding alone cannot remedy deficiencies in revenue administration. The findings support the conclusion that functional reform of the local fiscal model should precede the next stage of fiscal decentralisation. The proposed approach seeks fuller mobilisation of existing own-source revenue, reduced limitation-related losses, and a clear distinction between objectively insufficient fiscal capacity and inadequate administrative efficiency. Financial equalisation should retain its solidarity function while being complemented by mechanisms that encourage efficiency and accountable management. The study supports further fiscal decentralisation, provided that new or expanded functions are matched by corresponding resources within a framework of measurable administrative performance and responsibility. Local fiscal autonomy is therefore understood not as a mechanical increase in funding, but as a functional relationship: function - resources - responsibility - results - fairness.