Local Government Finances

All matters of local life are organised and resolved by local authorities, which operate independently on the basis of law. They also have independent budgets, which are formed on the basis of and according to the procedure set out in the Local Government Finance Management Act.

Local authorities comprise a significant part of general government finance. Their consolidated share in total general government expenditure is 25%.

The Ministry of Finance develops the financing (incl. equalisation and support fund division) and financial management principles of local authorities.

The main form of cooperation between local authorities and central government is the annual budget negotiation workgroups of the government committee established by the government and the delegation of the Local Government Associations Cooperation Assembly. The support allocated to local authorities, their cost base and matters concerning tax policy are discussed in the financial and tax policy workgroup formed by the Ministry of Finance.