[ Abstract / Highlights ]
The aim of this article is to analyze the role of the tax authorities of local governments in intergovernmental negotiations. The Danish local income tax rate is set by each local government. However, the average tax rate is set as per the intergovernmental agreement. Since the 1980s, the local tax authorities and those that control central expenditure were in conflict with each other . This article focuses on the Extended Total Balance Principle (Det Udvidede Totalbalanceprincip) as it resolves this problem to an extent. This principle states that the central government is forbidden from assigning new tasks without providing the requisite funding and from carrying out the central economic policy without taking into consideration the effect of municipal tax revenues. During the process of agreement about this principle, local governments could insist on their own requirements because of their strong tax authority.