The purpose of fiscal decentralization is to divide functions and responsibilities between levels of government and link them to the source of income. Studying the basic principles of the country's budget system, its structure and formation, identifying the functional and financial dependencies between the budget levels, is one of the top priorities in contemporary research. The purpose of this paper is to justify the role of fiscal decentralization, to study the reforms implemented in Georgia in this direction and to assess their impact on the development of local self-government, to analyze the situation in the municipalities of Georgia. Strengthening local government and increasing the level of decentralization is a challenge that will develop the democratic process and the inclusive economic growth that is the fundamental goal of Georgia's long-term social-economic development strategy" Georgia 2020". The purpose of this paper is to prove the need of fiscal decentralization, assessment of the quality, seek for new ways to improve the current situation, analysis of resource allocation and other recent reforms and its impact on different municipalities of Georgia. The subject of this study is the various macroeconomic problems that prevent the effective implementation of fiscal decentralization. The main results of this study can be summarized as follows: the level of fiscal decentralization revenue-wise is the lowest, while tax-wise its characterized by the highest estimates, VAT rules is an important step towards the fiscal decentralization, but along with the VAT rules it’s important to implement reforms that stimulate the economic activities and support the cooperation between municipalities.