A new institutional reform is one of the major stakes for the Belgian citizens and enterprises ahead of the regional election of June 2009. Since the general federal election of June 2007 Belgium has been facing new tensions between the two main Communities. On one side, the Flemish Community has been claiming a ?great? institutional reform that would significantly enlarge the competences and fiscal capacity of Regions and Communities. On the other the French-speaking Community is reluctant, fearing that this could further dismantle the federal State and reduce solidarity. The Flemish position was first made official in the Resolutions of the Flemish Parliament of March 1999. They ask the transfer to Regions or Communities of employment policy, including unemployment benefits, health care and family benefits. These new policies would be funded, at decentralised level, by the transfer to Regions or Communities of the income tax, part of the VAT and of the corporation tax, and by the creation of two or three regional or community systems of social security contributions. In this paper the Flemish claims are evaluated in the frame of the so-called ?magic square? : autonomy ? responsibility ? solidarity ? tax competition. It is argued that the present-day institutional structure fits the theory of fiscal federalism rather well. Further decentralisation would increase autonomy and responsibility and could create, as the Flemish Community claims, more homogeneous sets of competencies. However it would also affect solidarity and tax competition, and increase drastically the complexity of tax and social legislations and thus increase the administrative burden for multi-regional enterprises. JEL Codes ? H1, H4, H7.
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Find related papers by JEL classification: H1 - Public Economics - - Structure and Scope of Government H4 - Public Economics - - Publicly Provided Goods H7 - Public Economics - - State and Local Government; Intergovernmental Relations