In the first part of the paper we present and discuss the new legislation, on both local taxes and the Internal Stability Pact, enacted in Italy between September 2006 and December 2007. The most important aspects concern: the “thawing” of the income surtax levied by local government; the introduction of “dynamic” allocation of funding from the personal income tax (Irpef) to guarantee municipalities an automatic source of income, and an earmarked tax to finance local investments; new rules on property rates (Ici) mainly intended to reduce taxation on the principal family home; the legalisation of the use of property development dues for financing current expenditure; the temporary halt to the switch from waste disposal tax (Tarsu) to charges for the same service (Tia); the new rules included in the Internal Stability Pact, passed as part of the 2007 Budget and partially relaxed by the 2008 Budget, which first and foremost replace expenditure with deficit as the main indicator of municipalities’ financial rectitude. In the second part we analyse the principles of the bill on fiscal federalism proposed by the Council of Ministers in August 2007, and discuss its expected effects on the financing of municipalities. We mainly refer to the problems of financial coordination between the different levels of government, and the fiscal autonomy of municipalities. We focus in particular on the problems involved in financing the national standard levels of service set for social and health services and long term-care, which are the responsibility of central government but are actually delivered by regional and local authorities.
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Paper provided by University of Modena and Reggio E., Faculty of Economics "Marco Biagi" in its series Department of Economics with number
0603.
Find related papers by JEL classification: H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism