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From transfers to tax "co-occupation": the Italian reform of intergovernmental finance

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  • Ernesto Longobardi

    ()
    (Università di Bari)

Abstract

The paper provides some insights into the current reform of the system of intergovernmental relations in Italy. A most relevant change is the abolition of transfers from a higher level of government as an ordinary means of finance for sub-central governments, with the exception of grants having an explicit equalisation purpose. Since the room for autonomous local taxes is quite narrow, transfers are going to be substituted, to a large extent, by different forms of "co-occupation" of central taxes. Using the OECD taxonomy about tax autonomy, it is shown that the effective increase in "infra-marginal" tax autonomy of sub-central governments brought about by the reform will be quite modest. At the margin, however, where autonomy really matters, there could be enough room for the exercise of effective discretion. The main problem is that both the central and the sub-central governments fear the decentralisation of tax power. The former because it feels that, at least in the transitional period, the electorate might not properly distinguish the different fiscal responsibilities; the latter because they would prefer not to tax their electorate, notwithstanding their preferences for more stable and predictable sources of finance with respect to the current system.

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File URL: http://www.dse.uniba.it/Quaderni/SERIES/WP_0038.pdf
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Bibliographic Info

Paper provided by Dipartimento di Scienze Economiche e Metodi Matematici - Università di Bari in its series series with number 0038.

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Length: 722
Date of creation: Dec 2011
Date of revision: Dec 2011
Handle: RePEc:bai:series:wp0038

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Keywords: Intergovernmental finance; decentralisation; tax assignment; tax autonomy;

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References

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  1. Boadway,Robin & Shah,Anwar, 2009. "Fiscal Federalism," Cambridge Books, Cambridge University Press, number 9780521732116, October.
  2. Daniel Bergvall & Claire Charbit & Dirk-Jan Kraan & Olaf Merk, 2005. "Intergovernmental Transfers and Decentralised Public Spending," OECD Journal on Budgeting, OECD Publishing, vol. 5(4), pages 111-158.
  3. repec:rie:review:v:14:y:2009:i:1:n:6 is not listed on IDEAS
  4. Gastaldi Francesca & Longobardi Ernesto & Zanardi Alberto, 2009. "Sharing the Personal Income Tax among Levels of Government: Some Open Issues from the Italian Experience," Rivista italiana degli economisti, Società editrice il Mulino, issue 1, pages 157-190.
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Cited by:
  1. Richard M. Bird, 2013. "Below the Salt: Decentralizing Value-Added Taxes," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1302, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

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