New Conditions of Municipal Financial Management

Within the frame of municipal financial management in the Czech Republic, there has been perceived an issue of sharing taxes by municipalities for a long time. There are significant differences in tax revenues between small and large municipalities. These differences should be reduced by the oncoming change of the Act on Budgetary Allocation of Taxes. The prepared change of rules and criteria of tax assignment creates new conditions of municipal financial management. These are not only expressed by the new rules but it is also necessary to monitor the wider context of proposed changes which can be presented, for example, by the change of structure of municipal revenues etc. The aim of the paper is to predict impacts of prepared changes in tax assignment on municipalities and to draw recommendations for municipal financial management. As a method is used impact analysis of changes of tax assignment on municipalities. Of this knowledge are deduced additional impacts on financial management of municipalities. The main contribution of this article is to evaluate the impact of a new budget allocation of taxes on municipalities and formulate appropriate recommendations for municipalities, in a sense, how to change their practices under the new conditions to ensure the sustainability of financial management.