Correlational monitoring of fiscal federalism in the centralized and decentralized systems of the European Union

Abstract

Introduction. Modern pandemic threats, military-political tensions and conflicts, foreign economic risks, trade wars, financial imbalances encourage the EU countries to group and agglomerate financial potentials in the vertical and horizontal planes. There is a need to study the paradox of what role in this agglomeration is played by the mastery of using the principles of fiscal federalism, tested by a number of both unitary states and federal republics of the European continent.

The purpose of the article is to monitor the main determinants of fiscal federalism in increasing the financial potential of the member states of the European Union.

Method (methodology). In the course of the research, the following methods were used: dialectical, correlational, generalization, comparison, system analysis, observation, induction and deduction.

The results. The article highlights the importance and place of fiscal federalism in the architecture of the financial policy of the European Union. Pragmatic aspects of financing public services in the member states of the European Union have been studied. This made it possible to identify active recipients in the field of attracting financial resources to ensure the priority needs of economic development. It is emphasized that the functional direction of general public spending in the European Union was aimed more at social protection and health care, and to a lesser extent at environmental protection and development of the housing and communal sphere. It has been established that most of the member states of the European Union combine the principles of centralization, federalism, and decentralization (in most cases) in their fiscal doctrine, but there are also clear systems of classical fiscal federalism (Germany, Switzerland). The European approach emphasizes that a secondary effect of globalization is excessive tax optimization, because the functioning of the integrated market makes tax evasion more attractive.

An assessment of the influence of key parameters of fiscal federalism on the functioning of centralized and decentralized models of financial policy was carried out. This made it possible to identify the level of influence of the determinants of fiscal federalism on the relevant model through the prism of distinct factors. It is summarized that the use of determinants of fiscal federalism in the financial policy of the European Union is able to strengthen the budgetary and tax effects, which in the final (transformed) vector will lead to a strengthening of the economy and improvement of social standards both in the member states of the union and in individual municipal entities.