In this article it is argued that sound fiscal relations between national and subnational governments are based on a balance between central control and local fiscal autonomy. After sketching the theoretical aspects of the problem, we discuss some of the fiscal problems experienced by South Africa's provinces since 1994. We then argue that these problems are caused by insufficient provincial fiscal autonomy. Some suggestions are made as to how provincial fiscal autonomy may be reinforced without compromising central government control to an unacceptable degree.