OVERVIEW OF FISCAL DECENTRALISATION
Cyprus government's structure is based on a three-tier framework: the central level, an intermediate level composed of six districts, and a local level composed of 39 municipalities (urban areas and tourist centres) plus 478 communities (in rural areas). Of the 39 municipalities in Cyprus, nine are in the northern part of the island and, since 1974, have been part of Cyprus administered by the government of Northern Cyprus. These municipalities continue to maintain their legal status, although their mayors and councils have temporarily been displaced to the government-controlled area, as have the vast majority of their constituents.
Legal acts governing fiscal decentralisation
The major law governing local governments in Cyprus is the Municipalities’ Law 111 of 1985. Since being introduced, the law has been amended 25 times.
Qualifying fiscal decentralisation
Being a relatively small country, Cyprus is one of the most centralised EU member states, with very limited locally-determined expenditure at the sub-national level (see the pie chart below) and very limited competencies devolved to local authorities. Local government revenues are composed of local taxes, license fees and rights (around 50%) and transfers from the central government (around 40%), with the remaining 10% coming from fines and other revenues.
Source: authors’ elaboration on EUROSTAT data. For further details, see
methodology.
LEVEL OF FISCAL DECENTRALISATION
While having very limited resources, revenue autonomy (own revenues relative to total resources available) at the local level is above the EU average (57%% versus 53% in 2017). The rate of dependency on central government transfers nevertheless is slightly higher than the EU average (51% versus 48% in 2017). Confirming the small role played by local governments in delivering public services, local own revenues represented 2% of total government revenues in 2017, which was lower than the EU average of 13%.
Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.
The composite ratio (2% in 2017), capturing aspects of fiscal decentralisation for both revenues and expenditures, confirms that sub-national governments in Cyprus have a degree of fiscal decentralisation that is lower than the EU average (17% in 2017).
Deficit and debt at sub-national levels
Debt levels since 2013 have mostly decreased, falling to 1.3% in 2017 but rose again to 1.5% in 2018.
Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.
EXPENDITURE BY GOVERNMENT LEVEL AND BY POLICY AREA
Local expenditures represent a significant part of total general government expenditures in the fields of environmental protection (73% of total expenditures), recreation culture and religion (26%), and housing and community amenities (26%). In all other areas of spending, local expenditures make up a minimal fraction of general government expenditures, being either very limited or non-existent.
Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.
As a percentage of total local spending, sub-national expenditures in the areas of general public services (41%), housing and community amenities (28%), recreation culture and religion (16%), and environmental protection (14%) are higher than the EU average. In all other areas of expenditure, no spending is reported.
Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.
