fiscal federalism

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The division of revenue collection and expenditure responsibilities among different levels of government. The central, or federal, government is usually free to choose tax instruments, and its responsibilities typically focus on national defence, the provision of law and order, infrastructure, and transfer payments. Local governments are allowed to levy a restricted set of taxes and their responsibilities usually include the provision of education, health care, and local infrastructure. Levels of government are connected by overlapping responsibilities and the transfer payments made between them.

Subjects: Economics.

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