Is fiscal federalism the answer?


Localizing parliamentary debate may be a better solution. By such decentralization, Malaysian aspirations will be better tied to local needs. Transferring the task of resource allocation to the widely dispersed electorate may not be as difficult as we think.

THE complaint that state governments are given insufficient funds to operate at the local level is as old as the nation’s half-century history.

Malaysia is a federation of states and problems arising from fiscal federalism cannot be avoided. Fiscal federalism involves how best to assign to the different layers of government (local, state and federal) various fiscal functions (health, education, police, etc) and how best to collect public revenues (local, state and federal tax).

Ideally, each level of government should raise its own revenue to meet its allocated functions but this is often not the case, as in Malaysia, where state governments depend on the transfer of federal grants in order to have sufficient funds to operate.

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