1. 4th International Conference on Federalism: SALZBURG 13-14 October 2007 1 2.3.2 To what extent do Central governments erode states jurisdiction using fiscal arrangements? A perspective from Italy Augusta Badriotti augusta.badriotti@unito.it Centro studi sul federalismo, Turin Università di Torino

2. 4th International Conference on Federalism: SALZBURG 13-14 October 2007 Introduction Stylised facts: 1861: complete unification from different states becoming a highly centralised state 1948 Republican Constitution with some elements of federalism –Art. 5 local autonomies –Title V created Regions with legislative power, art.119 financial autonomy –However only special statute regions were created –Only in the 1970s 15 ordinary regions were created, but no de facto fiscal autonomy

3. 4th International Conference on Federalism: SALZBURG 13-14 October 2007 1990s citizen asked more political accountability driven also by political parties and a phase of administrative decentralisation started. i.e. Bassanini Laws 2001: reform of the title V of the Basic Law changing the relation between regions and Central state –Concurrent and exclusive competencies on spending and taxing areas Other attempts to change the Title V were started but ended without success Currently there is a discussion to transform the Second Chamber in a territorial one, a federal senate

4. 4th International Conference on Federalism: SALZBURG 13-14 October 2007 So, Title V has transformed Italy into a quasi - federal state, (perfectible…) but this is on the paper –Lack of implementation through ordinary law –The crucial point are not (only) the sometimes not clear assignments of competencies, but the scarce resources assigned to regions Do actual fiscal arrangements erode regions jurisdiction? After 7 years art. 119 still need to be implemented and central state continue to enjoy much of the fiscal power with no room for regions –High vertical imbalance, non sustainability of regions, ie heath care

5. 4th International Conference on Federalism: SALZBURG 13-14 October 2007 Fiscal Arrangements By now regulated by Law 56/2000 – Elimination of central government transfer substituted by a horizontal equalisation transfers based on VAT – But adaptable to the new art 119, lack of willingness – Not fully applied Internal stability pacts: agreements on local municipalities indebtedness and spending Intergovernmental Fora Budget law: although formally involved rarely their are asked to participate to its design

6. 4th International Conference on Federalism: SALZBURG 13-14 October 2007 Tax resource are: – Regions: fuel tax, Pit surcharge, IRAP, taxes on motor vehicles – Provinces and municipalities property tax and Pit surcharge, waste tax, Sub national share in general government spending passed from 15% in the 1990s to 30% in 2005 So, decentralisation has increased regional and local autonomy but in absence of a clear equalisation system, this is not enough to finance decentralised public spending

7. 4th International Conference on Federalism: SALZBURG 13-14 October 2007 Concluding remarks Intergovernmental fiscal relations have moved along cycles with varying degree of decentralisation. Fiscal federalism in the new Constitution is far from satisfactory –Share of responsibility is marred by over overlap of legislative competences –Non adequate financial model to sustain the reform There is an urgent need of implementing art. 119 with new regional and local tax assignments correlated with functions assignments