This report analyzes the distributional impact of Romania's 1999 Law on Local Public Finance, and makes recommendations for ameliorating its adverse effects. By providing a stable revenue source for municipalities, this law improves the investment planning and financial management capabilities. However, in a survey of local councils, the authors find that the law tends to favor councils with strong revenue-collecting capacity and wealthier tax bases. The councils that lack these attributes witnessed a serious decline in their revenue sources. The report makes a series of recommendations for how to counter the negative distributional effects of an otherwise commendable law.
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