The public, donor community and the political subjects in Macedonia are
occupied with the issues of decentralization. The bills package on territorial
division, financing LSG and the status of the capital Skopje have passed the
government/parliament procedure. In this paper some recent developments
and challenges on the newly enacted law on financing LSG will be presented.
We will use the main pillars of fiscal decentralization approach. Also, an
attempt is made to estimate the fiscal capacity of LSG by using three
techniques: the own revenue collection, GDP per LSG and the representative
tax system with regression analyses. The deficiency here is the availability of
data. Namely the revenue data are available for the NUTS 4 level that is the
34 LSG from the before 1996 territorial organization. Estimation is conducted
for the unconditional horizontal equalization formula in accordance with the
new law on financing LSG. In the end some administrative implication from
the law are illustrated and some comments on the statistical information
system in the country related to the LSG are illustrated.