Considerable attention has been given to enhancing subnational development finance in response to the 2008 global financial crisis and recent global development agendas, including the Sustainable Development Goals, Financing for Development, and Habitat III/New Urban Agenda. Much work on this topic is fragmented, focusing on specific elements of development finance: fiscal transfers, capital market access, public-sector lending agencies, or public-private partnerships. Most countries, however, have a range of subnational governments with varying needs and capacities that require different and evolving mixes of development finance mechanisms. Enabling greater subnational borrowing is often desirable but requires adoption of other reform policies to improve the fiscal capacity and creditworthiness of subnational governments over time. This paper reviews the rationale and potential for improving subnational development finance, outlines the overall landscape of institutional arrangements available for this purpose, and considers broad challenges involved. Based on a review of global practice and experience in selected Asian developing countries with a range of special entities and innovations to enhance subnational investment, it proposes a more integrated, strategic approach to building subnational development finance.

Pages 135-136 are on property tax. 'Another form of recurrent taxation that can be tapped for further resources in most developing countries is immovable property taxes. These taxes do not distort labor markets, human capital accumulation, or innovation decisions. Property taxes also provide a stable source of revenue that is less susceptible to short-term economic fluctuations and is difficult to evade. And although property taxes would likely not flow into federal social protection schemes (they are typically raised by local governments), they could fund regional or municipal social services or reduce the level of federal transfers to local governments. On average, high-income countries raise 1.1 percent of GDP from immovable property taxes. In middle income countries, these taxes yield about 0.4 percent of GDP.19 Yet property taxes represent untapped revenue potential for all countries. This revenue gap is estimated to be 0.9 percent of GDP in middle-income countries and as much as 2.9 percent in high-income countries.20 Governments in Sub-Saharan Africa are estimated to be missing out on revenues of 0.5 to 1 percent of GDP because of no property taxes whatsoever or their limited application.'