Fiscal federalism in the Baltic countries

In the democratic societies local government handles many functions typical of the welfare states. The relationships between central government and local municipalities are complex and concern very many different, particularly socially sensitive aspects. In the Baltic countries new institutions and economic infrastructure are being created to establish the foundations for a pluralist and democratic society. Extensive political and fiscal decentralization of local governments is now under way in all these states as a reaction to the overcentralization during the Soviet past. The presentation concentrates on analyses and comparisons of different fiscal decentralization issues on the Baltic countries. The main objectives of the study are: - design of fiscal systems and intergovernmental fiscal relations - profile of sub-national revenues and expenditures - analyses of match between local expenditures and the corresponding revenues - reginal fiscal disparities reasons Today main problems in all three Baltic countries is that local governments have very limited resources to fulfil their main functions - provide variety of public services like education and social care. Their financial resources and administrative capacity are often limited and strongly controlled by the central authorities. In addition, municipalities revenue basis varies extremely by different regions within the countries. As a result, living standard disparities among municipalities are incredibly large and continue to grow. Differences in public services and incomes eventually follow to discarded migration flows, excessive population concentration in the capital city regions (especially in Latvia and Estonia). The most important goal of the fiscal reforms is to enhance the administrative capacity of different level of governments, democratization of the decision making process and giving public spending programs required transparency. Therefore, the fiscal functions and roles of the central and local governments in the Baltic countries need theoretical explanation as well empirical analyses.

Fiscal federalism in the Baltic countries: from Soviets to EU

The Baltic countries’ local governments have been functioned during the last decade in a permanently changing environment. Like other transition countries, they inherited from the past extremely centralized administrative system. Along with radical reforms, administrative system was decentralized and various functions were devolved from central to lower levels of government. Despite that, municipalities are still fiscally strongly dependent from central authorities. Often their fiscal capacity is not adequate to act in accordance with functions stipulated by laws. Many local governments’ revenues from taxes and user-charges are insufficient to finance efficiently their expenditures. Disparities in municipalities’ fiscal situation are correlated with unbalanced regional growth, social degradation in the low-income regions and growing differentiation by municipalities’ residents on access to education and healthcare. Membership of the European Union brings new tasks and responsibilities for the Baltic local governments. Municipalities should increase their economic sustainability and enhance administrative capacity to explore EU accession funds and implement EU policies. Considering the above-mentioned problems, the paper focuses on current fiscal situation of local governments in the Baltic countries. The main interest is to analyze local municipalities’ revenue level and structure, expenditure composition and fiscal autonomy conditions

ECONOMIC AND SOCIAL IMPACT OF ALCOHOL TAXATION IN THE BALTIC COUNTRIES

This paper is focusing on alcohol taxation in the Baltic countries. The purpose of the study is to demonstrate alcohol taxes regressive characteristics across various income groups. Alcohol taxation is rather sensitive issue in the Baltic countries – alcohol consumption level is relatively high and public sector revenue depends significantly from alcohol related taxes. Therefore, a system of alcohol taxation in the Baltic countries should consider multiple aspects, such as taxation’s social impact, public sector revenue and other theoretical foundations for allocating alcohol taxes over different income groups. Paper’s statistical analyses is conducted on the basis of a consumer survey, carried out in all three Baltic countries during 2015-2016. As the study results demonstrate, alcohol taxation is regressive in the Baltic countries and the future tax policy should consider the above-mentioned taxation principles

Welfare Disparities in Transition Economies: Case of Estonia

The purpose of the article is to analyze the changes in income distribution in transitional societies and show the impact of income disparities on economic growth and social development. Particularly the article analyses the income differences by the sectors and regions of Estonia. A decade ago substantial disparities in income were considered mainly as a problem of developing countries. In communist societies income distribution was considerably more equal despite the fact that average income level was much lower than in the Western welfare states. The situation in the former communist countries significantly changed after reforms began in the early 90s, when a large differentiation by income and wealth rapidly took place. Theoretically, the uneven income distribution has been considered as a supportive factor to economic growth. Recent empirical research (as well as the analyses done by the authors) generally does not confirm that. The authors emphasize that considerable differences in income are considered as "unfair" by large groups of the population. The result might be destabilization in society and low economic growth. Also a human factor plays a more important role than it was assumed earlier. In fact, high technology transfers to the transitional countries support economic growth. However, production efficiency cannot be achieved without a highly qualified and motivated labor force. Large differences in income often benefit a limited number of highly qualified professionals but ruin the morale and eventually qualifications of large groups of employees. As a conclusion, the transitional economies have to decrease income and regional disparities to maintain sustainable growth.

BALTIC CONSUMER AND ALCOHOL CHOICE

The paper considers the relationship between socio-economic factors and alcoholic beverage preferences in the Baltic countries. The consumer groups are structured by the main types of alcoholic product – beer, wine and strong ethyl alcohol. Certain common features are identified, which characterize those different alcohol consumer groups. Understanding the relationship between preferences by alcohol type and socio-economic characteristics is an important when designing public alcohol related policies and regulations. The analyses are based on a consumer survey (IARD, Washington DC) held simultaneously in all three Baltic countries in 2016. A multinomial logistic regression model is used to predict the relationship between preferred alcoholic beverage and socio-economic characteristics

DYNAMICS OF EUROPEAN TAX STRUCTURES

The paper is focusing on the European Union countries tax structure changes during the last decade. Deep economic recession in the 2009-2010 and critical sovereign debt levels have forced the European Union countries rethink their tax systems effectiveness to restore growth. One of the aspects of taxation system improvements is related with modifications in of tax structure. There is argued, that the tax structure has an important impact on growth. Taxes supposed not only to facilitate smooth cross border trade activities, but also should generate proper public revenue and not to harm economic growth. Therefore, the Commission invites to increase quality of taxation through more growth-friendly tax structure. The main purpose is to shifting tax burden from “labor to consumption”. The paper maps structural changes in taxation across the EU countries groups. Actually the most of structural changes takes place in the New Member States; at the same time the old EU countries tax structure has remained mostly unchanged. The new EU member states have decreased income taxation burden and increased taxes on consumption

Land and property taxation in the Baltic States

The paper is focused on developments of land taxation in the Baltic States during the last decade. In this period tax and budgeting reforms became an integral part of reform process in these countries. Devolution of government functions to the local level means more autonomous decision-making by sub-national governments, thereby also suggesting autonomous powers to raise revenue. The land tax clearly stands out as possibly one of the most important among several revenue sources collected mainly by the local governments. Together with land privatization and establishing of land markets, the Baltic governments are becoming more interested in the prospect of using that tax as a powerful instrument for revenue collection, which allows provide more public services. Presently, however, land tax systems do not allow local governments to make use of them as important raisers of revenue. Baltic countries are still far from designing efficient land taxation mechanisms. The most pressing list of problems already includes fundamental issues as proper land valuation, stimulating efficient use of land and poor tax administering. Also it should be stressed that land taxation is emotionally sensitive issue. Land reforms in the Baltic States introduced millions of new landowners. Many of these new landowners are likely to resist any changes in taxation of their property. The impact of land tax can also be important in steering regional development. Municipalities? strategy to design land (property) tax systems or rates for different parcels of land may cause population movements described by Tiebout. Therefore efficient land taxation systems should strengthen tax capacity of municipal governments and the optimal development of land use over time.

Estonia: In and Out of Crisis

The paper analyses Estonian economic developments during the first decade of 21st century. Estonia provided in that period a clear-cut example of the classical business cycle with an extreme bubble-burst sequence of economic activities. The author analyses the reasons on such a volatile economic growth pattern and explains economic cycle management particularities in Estonia. In the frames of macroeconomic developments will be analyzed monetary and fiscal policies. The author argues, that Estonia’s fiscal policy has been always pro-cyclical, what has deepened country’s macroeconomic volatility. The paper also analyses critically the government activities and policies during the recent crisi

Estonian Tax Structure

The paper analyses Estonian tax structure changes during the last decade and critically assesses the current situation. The country’s tax mix is rather unique among EU countries – it has one of the highest proportions of consumption taxes in total taxes and the lowest level of capital and profit taxes. Such an unbalanced tax structure creates risks for public finances, limits revenue collection and distorts the business environment

Spatial and social disparities in the decline of activities during the COVID-19 lockdown in Greater London

We use data on human mobility obtained from mobile applications to explore the activity patterns in the neighbourhoods of Greater London as they emerged from the first wave of COVID-19 lockdown restrictions during summer 2020 and analyse how the lockdown guidelines have exposed the socio-spatial fragmentation between urban communities. The location data are spatially aggregated to 1 km2 grids and cross-checked against publicly available mobility metrics (e.g. Google COVID-19 Community Report, Apple Mobility Trends Report). They are then linked to geodemographic classifications to compare the average decline of activities in the areas with different sociodemographic characteristics. We found that the activities in the deprived areas dominated by minority groups declined less compared to the Greater London average, leaving those communities more exposed to the virus. Meanwhile, the activity levels declined more in affluent areas dominated by white-collar jobs. Furthermore, due to the closure of non-essential stores, activities declined more in premium shopping destinations and less in suburban high streets