The Hon Sir Gerard Brennan AC KBE
former Chief Justice of the High Court of Australia
Conference Committee:
Suri Ratnapala, Professor of Public Law, UQ
Thomas John, Chair, European Focus Group, LCA
Nicholas Aroney, Reader in Law, UQ
Hendryk Flaegel, International Law Section, LCA

Main Concepts

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The concepts of fiscal federalism are related to vertical and horizontal fiscal relations. The notions related to horizontal fiscal relations are related to regional imbalances and horizontal competition. Similarly the notions related to fiscal relations are related to vertical fiscal imbalance between the two senior levels of government, that is the centre and the states/provinces. While the concept of horizontal fiscal imbalance is relatively non controversial (as explained above), the concept of vertical fiscal imbalance is quite controversial (see Bird 2003[7] and Sharma 2011 [8]) A recent article published i Public Administration, Blackwell, Oxford, authored by Chanchal Kumar Sharma, clarifies the notion of vertical fiscal imbalance.[9] The paper also demonstrates how the notion of Vertical Fiscal Imbalance (VFI) is conceptually distinct from the notion of Vertical Fiscal Gap (VFG). These terms are used as synonyms which they are not. Recent attempts at differentiating the notions, particularly in the Canadian literature on fiscal federalism, had rather added to the confusion (see Sharma 2011, Tables 1,2,3; section VI). The incisive analysis of the aforementioned paper at once clarifies the entire conceptual confusion.

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