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.
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.