Federalism

is a legal notion for a system of governance, as well as the movement aimed at the formation of federal states – federations, which are a form of integration of areas related geographically, historically and culturally, and united by other interests, while preserving the self-government and state status of their constituent parts. Government systems within the states are considered to be federal, when the constituent federal units have their own institutions, decision-making powers, profits (for self-government purpose), and participate in decision-making at the central level. Among the European countries, Switzerland, as well as Germany, Austria, Belgium and, to some extent, Spain are the federal states.

Financial/fiscal decentralisation

is the process for the delegation of decision-making powers to local self-government in the sphere of budget regulation to promote socio-economic development of regions. It implies the fiscal independence of local self-government authorities in decision-making as to the formation of a basis for taxes, determining the rates of relevant local taxes and fees, introducing tax incentives for economic sectors at the regional level, as well as formation of a structure for expenditures in providing public goods to the population.