Integration, decentralization, taxation, and revenue sharing : Good governance, sustainable fiscal policy and poverty reduction as peace-keeping strategies

Integration, Decentralization, Taxation, and 
Revenue Sharing: 
Good Governance, Sustainable Fiscal Policy and 
Poverty Reduction as Peace-keeping Strategies
Paper prepared for the 
GTZ-Director’s Seminar for the General Secretariat of the EAC on 
Tax Harmonization and Regional Integration 
Arusha/Tanzania, April 23/24, 2008 
August 2008 
Mit den Finanzwissenschaftlichen Diskussionsbeiträgen werden Manuskripte von den Verfassern möglichen 
Interessenten in einer vorläufigen Fassung zugänglich gemacht. Für Inhalt und Verteilung sind die Autoren 
verantwortlich. Es wird gebeten, sich mit Anregungen und Kritik direkt an sie zu wenden und etwaige Zitate aus 
ihrer Arbeit vorher mit ihnen abzustimmen. Alle Rechte liegen bei den Verfassern. 
ISSN 0948 - 7549 

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Integration, Decentralization, Taxation, and 
Revenue Sharing: 
Good Governance, Sustainable Fiscal Policy and
Poverty Reduction as Peace-keeping Strategies
 
by 
Hans-Georg Petersen 
University of Potsdam and DIW Berlin 
Abstract: 
The paper tries to shed some light on the problems of centralization and decentralization 
within an economic union and the federal member states. Integration and decentralization 
are not opposite policy strategies but both meaningful if the single public goods and services 
supplies are analyzed in more detail. Both strategies doubtlessly have advantages, which 
can be realized if the manifold possibilities are combined in an efficient approach of good 
governance. Best practice approaches in inter- or supra-national integration, fiscal federalism 
and taxation do exist and have to be successfully implemented. Obviously such a modern 
fiscal policy has to be accompanied by an appropriate monetary policy, which in an economic 
union has to be carried out by an independent central bank as one of the necessary counter-
vailing powers in a democratic setting. A modern fiscal policy strategy efficiently controls 
budget deficits, which naturally have to be limited to finance reliable public investments. Such 
strategy has to be safeguarded through modern methods of budgeting and fiscal planning. 
Modern public management with a clear code of conduct for the government officials ensures 
corruption free administration.
Keywords: 
Centralization, decentralization, ethnic differences, fiscal federalism, fiscal planning, good 
governance, harmonization, integration, nation building, revenue sharing, sustainable fiscal 
policy, tax reform.