Fiscal Practices and Potentialities

Abstract

Before settling down to discuss the financial resources available for urban development it is desirable to pause for a moment to consider what the total orientation and image of local finance should be. Local finances are part of a national tax system and their potentialities depend on (or are heavily influenced by) the fiscal policies and practices of higher levels of government, as well as on what they are formally permitted to do under the Constitution.¹ For instance heavy use by the national government of income, profit, general sales and turnover taxes may virtually squeeze out any use of these taxes by local governments, even by Metros. Again, in a federation the states frequently have the right to taxes on land, and it is only by their grace and favour that local governments can have an independent stake in these most useful taxes.