Non-Correspondence:

When tax powers are assigned mainly on the basis of efficiency criteria among different layers of government, it may violate the principle of adequacy.  As a result, the revenue assigned to each government is not adequate to carry out  the functions entrusted to it.  One reason for non-correspondence is lack of a clear-cut division of functions in a federal country.  The other reason is that the revenue yield from same taxes varies among the federating units including the local governments.  Another reason is the wide differences of financial needs of states due to their natural and economic conditions.  The term non-correspondence which was first used by Anthony D. Scott in 1964 exists universally in almost all federations. This non-correspondence results in vertical and horizontal fiscal imbalances.