1. Introduction

Fiscal decentralization is the re-formation of governments where power is being transferred from the central government to local government authorizes. Fiscal decentralization enhances corporation, participation, transparency and accountability in public service delivery (Kwon, 2012; Faguet, 2014). The last few decades have seen a lot interest in fiscal decentralisation globally by public administration scholars, development experts and governments. Fiscal decentralisation has been used by developed countries to reform their intergovernmental fiscal activities in order to provide public goods and services to their citizens (Bennett, 1990; Wildasin, 1997; Manor, 1999; Faguet, 2004; Arowolo, 2011; Faguet, 2014). Several developing countries have also used fiscal decentralisation to promote to effective and efficient governance, macroeconomic stability, economic growth and development (Bird and Vaillancourt, 1999). Some countries have also used fiscal decentralisation to improve governance by strengthening their relationships with private sector and civil society (Arzaghi and Henderson, 2005; Shah, 2005; Faguet, 2014). Studies over the past few decades have provided important information on the effects of fiscal decentralisation on government reforms. The purpose of this study is to critically evaluate the role of fiscal decentralization as an effective tool for government reforms. This study is divided into five (5) sections and section one (1) is the introduction to the study. Section two (2) discussed literature on the concept of fiscal decentralisation. Section three (3) reviewed relevant literature on the effects of fiscal decentralization on government revenue. Section four (4) contains literature on the effects of fiscal decentralization on government accountability and corruption, and section five (5) reviewed literature on economic growth local development and economic development.

2. Concept of Fiscal Decentralization

It is necessary to clarify exactly what is meant by fiscal decentralisation before talking about the effects of it. Fallati (2004) sees fiscal decentralization as the set of procedures intended to increase the revenues or fiscal independence of local government. Fiscal decentralization is the process of using applying the principles that helps in designing financial relationship between the central government and local government (Sharma, 2005). Fiscal decentralization enhances the transfers of revenue from the central government and the creation of new local taxes to local government authorities (Kokor and Kroes, 2000). Fiscal decentralization is the transfer of fiscal authority to local governments. Fiscal decentralization gives empowerment to local authorities to generate and spend revenue (Bahl, 2008). Bird (2009), conceptualised the fiscal decentralization theory focused on situations where different levels of government provide public goods and services in their jurisdictions.

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3. The effects of fiscal decentralisation on government revenue

The academic literature on the effects of fiscal decentralisation on government revenue has revealed several contrasting views. Fiscal decentralization has the potential to ensure a more equitable distribution of resources due to local competitiveness and attention on critical local preferences. The inputs and incomes must be monitored to ensure that the intended objectives of fiscal decentralization to achieved (Rodriguez-Pose & Ezcurral, 2010). One of the vigorous principles of fiscal decentralization is that the absent of various sorts of externalities, decentralized governments that rely on own-source revenues should be more fiscally efficient than decentralized governments that rely on grant financing (Goodspeed, 2011). Local governments being closer to the people are more accountable to its citizens. The measure of fiscal decentralization that best reflects incentive effects at the sub-national level is revenue autonomy, or the share of local government expenditure financed by own-source revenue (Ahoi, 2010). This means that sub-national governments must have the authority to own-finance locally provided services. More complete revenue autonomy requires at a minimum, the authority to set tax rates, and an assignment of at least one significant tax source. Another study was conducted by Guang (2018) on the revolutions in China’s inter-governmental fiscal system. The study found that tax-sharing system (established in 1994) provides for revenue centralization, spending decentralization, and large central transfers to local governments. Fiscal decentralization may unpredictably increase both central and local government size even when they are funded by their own taxes (Cassette and Paty, 2010). The influence of fiscal decentralization instruments on local government size shows that only property taxes have a negative and significant impact on the size of the local public sector (Liberati and Sacchi, 2013). Property tax is normally assigned on tax separation schemes at a local level. Fiscal decentralization raises trust not only in government but also for other political entities such as political parties and parliaments (Ligthart and Van Oudheusden, 2015).

5. The effects of fiscal decentralisation on corruption

Fiscal decentralization that is accompanied by revenue decentralization is likely to discourage corruption while expenditure decentralization that is funded by grants tends to encourage corruption (Goodspeed, 2011). Fiscal decentralization may affect gover