Local Finance and Decentralization. The Case of Local Governance in Albania

The financial situation of local government units in the Albania, even though it has improved compared to the decades ago, is still delicate and full of challenges for the future.Financial resources, without neglecting the capacity building of the local administration, are a key factor to the expanding of the decentralization between the central and local government.With decentralization we will understand the legal transfer of authority and resources from the central government to the local government, which changes the way in which services are offered and how they respond to citizens' requests.The local government gets more decision-making power, which means it gets more responsibility.Otherwise, decentralization can be defined as the more responsibility and more functions, and for this to be realized, the funds are needed and these funds must be used efficiently.The purpose of this paper is to present the current situation of the local government in Albania, to highlight the importance of the expansion of decentralization and to emphasize the impact of the funding sources in the increasing of the independence and decision-making of the local government.In Albania, local government is currently organized at two levels, Counties and Municipalities, based on the new territorial division that was made in 2015, our country has 12 counties and 61 municipalities.The financing sources of the Local Government in Albania consist of transfers from the central government, from its own income and other sources from different donors through competing projects.The increase of the local financial autonomy, with the aim of increasing the financing of the local government units' own functions, should be aimed the increasing of the their own income, especially from the real estate tax, increasing the share of joint taxes, lobbying for benefited from national taxes (such as VAT or Income Tax) as well as the increase in the efficiency of the use of resources.