Fiscal Equalization

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Fiscal Equalization

The fiscal equalization schemes used in many countries equip fiscal equalization formulas. Those formulas differ in the precise structure, but they do share some common features. Most formulas take both the fiscal capacity and fiscal need into account. Basically, the jurisdictions with high fiscal need and low fiscal capacity should receive more grants to reduce their fiscal gap. With the exception of the Canadian equalization program, which only equalizes fiscal capacity, many countries’ transfer schemes, like Australia, UK, Brazil, China, Indian, Switzerland and Germany, have a feature of equalizing cost disparities..

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