The thesis attempts to examine and asses the trends of fis cal decentralization in Ethiopia inrngeneral and Somali National Regional State in particular. Thi s is done first by allempt to placerntheoretical and empirical inv estigation. fO di scern asp eC lS of change and continuity in f isca lrndecentralization in Ethiopia. Th e sludy he lps to cril ica l ly se l OUI f act ors that are resp onsible forrnsimilarities and differences across years and put impli calion of the study accordingly. We developrnindicators to measure the degree of decentralization both in Ethiopia and with regional case study.rnThe fiscal decentralization indicators are revenue share between central and regionalrngovernments, expenditure share between center and regional governments and aspects ofrninter-governmental tran~fers. We also analyze expenditure assignment in light of own revenuernwhich reveals fiscal capacities of reg ional and local government respectively.rnThe research primarily inquires how fiscal decentralization is practiced in the regiOn. In ligh t ofrnthe above main objective it tries to see the overall impacts of decentralization on socio-economicrnbackground, capacity, planning and budgeting in th e region. The researcher applied arncombination of quantitative and qualitative social research methods specifically; a case study.rnThis is be cause tra cin g th e practice o(fiscal dec en trali:a lio l1 in mO Sf cases entails 'hall" andrn'why' questions, which are hell er answered by case .H udi e.lÂ· rather than resear ch designs such asrnsurveys .rnThe main conclusion that emerged Fom the study; higher degree of decentralization for recurrentrnexpenditure than capital across years, low fiscal capacity of local government, diverse Fiscalrncapacity among regions to .fianc e expenditure responsibility out of own revenue sources.rnPrevious studies on the is sue have made an allempt to generate consensus. They concluded that ,rnweak revenue bases, capacity deficiency, tendency to decentralize expenditure than reve nue.rnHowever this study concludes diverse .fiscal capacity both at regional and local level ofrngovernment provides evidence that, resource and tax bases, infrastructure coverage , institutionalrnstrength and some other geographical and socialfactors are not evenly distributed this providesrnan explanation /01' the fact that th e above variables may prevent/ul! use a/production fac torsrncritically indicating to give emphasis to each :,pecific var iahles and their dynami c link they have torneach individual region based on each characlerislics.rnThis in turn provided strong support f or Tegegne eral (2 0 0 7), Getach ew (2 002) , Melkamu (200-1) ,rnDegefa (2003) tha t emerging re gions have very limited re source and sever .financing gap, potentialrnand actual revenue collection indicat es that there is h uge difference between the two. Thisrnindicates the need to streng th th e mechanism for lo cal reso urce mobilization could in fact be thernwayforwardrnKey Wor ds: Fiscal Federa lism, St ate an d Local Taxation, Intergovel'llm elltal Relatio n