Fiscal federalism concept" that helps in designing financial relations between the national and subnational levels of the government, "fiscal decentralization on the other hand is a process of applying such principles". Federal and non-federal countries differ in the manner in which such principles are applied. Application differs because unitary and federal governments differ in their political and legislative context and thus provide different opportunities for fiscal decentralization. The concepts of fiscal federalism are related to vertical and horizontal fiscal relations. The notions related to horizontal fiscal relations are related to regional imbalances and horizontal competition. Similarly the notions related to fiscal relations
Fiscal federalism in a particular country, can be determined by using certain criteria that the author has evolved. The kind of policy solution to be applied will depend on the nature of asymmetry (VFA). Thus, there can be three types of VFAs: The VFI-VFG-VFD offers a nice framework to understand and debate issues surrounding fiscal federalism. VFD is a concept that has entered the lexicon of fiscal federalism and has the power to clarify the debate on intergovernmental financial relations. Vertical Fiscal Gap as the revenue deficiency arising from a mismatching between revenue means and expenditure needs. OECD Network on Fiscal Relations