25 Jul, 2017

New IMFG Perspectives paper: How Much Local Fiscal Autonomy Do Cities Have?

New paper from the Institute on Municipal Finance and Governance compares fiscal autonomy of eight global cities – Toronto has fewer tax options than almost all others.

Toronto, July 25, 2017 – Major cities across Canada have been asking for more fiscal autonomy so that they can “control their own destiny.” But what exactly is fiscal autonomy and why is it important? A new Perspectives Paper released today by Enid Slack, director of the Institute on Municipal Finance & Governance, attempts to answer these questions by analyzing the municipal finances of eight international cities.

Local fiscal autonomy is the extent to which local governments rely on locally raised revenues for funding and their ability to set their own tax rates. A comparison of Toronto, London (UK), Paris, Berlin, Frankfurt, Madrid, Tokyo, and New York reveals that Toronto is less dependent on intergovernmental transfers than many other major cities but, with the exception of London, it has fewer tax options.

Fiscal autonomy is a pivotal element of a city’s fiscal health – among other benefits, local governments are more likely to spend responsibly if they have the autonomy to raise the revenues to pay for their expenditures. Fiscal autonomy means that cities take responsibility for setting their own tax rates on any new taxes such as income or sales taxes, rather than asking the federal and provincial governments to increase their tax rates and transfer revenues to cities.

This study concludes that Toronto and other Canadian cities would benefit from greater fiscal autonomy. “Toronto and other Canadian cities are responsible for a wide variety of services, including fire and police protection, water, sewers, garbage collection, roads, and transit,” says Enid Slack. “To control their own destinies, and to be efficient and accountable to taxpayers, they need access to a greater mix of taxes, and the ability to set their own tax rates.”

About the Author

Enid Slack is Director of the Institute on Municipal Finance and Governance, and Adjunct Professor at the Munk School of Global Affairs at the University of Toronto. Enid has been working on municipal finance issues in Canada and abroad for 35 years. Before establishing IMFG, she was a consultant specializing in municipal finance. Enid has worked with the World Bank, the International Monetary Fund, UN Habitat, the Asian Development Bank, and the Inter-American Development Bank in countries around the world. In 2012, Enid was awarded the Queen’s Diamond Jubilee Medal for her work on cities.

About the Institute on Municipal Finance and Governance (IMFG)

The Institute on Municipal Finance and Governance is a research hub and think tank that focuses on the fiscal and governance challenges facing large cities and city-regions. It is located within the University of Toronto’s Munk School of Global Affairs.

For more information, please contact:
Selena Zhang | Manager, Programs and Research
Institute on Municipal Finance and Governance, Munk School of Global Affairs, University of Toronto
selena.zhang@utoronto.ca | www.imfg.org