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From Transfers to Tax 'Co-Occupation': The Italian Reform of Intergovernmental Finance

Ernesto Longobardi

University of Bari

December 7, 2011

SERIES Working Paper No. 38

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 equalization 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 decentralization 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.

Number of Pages in PDF File: 22

Keywords: Intergovernmental finance, Decentralisation, Tax assignment, Tax autonomy

JEL Classification: H71, H77

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Date posted: December 8, 2011  

Suggested Citation

Longobardi, Ernesto, From Transfers to Tax 'Co-Occupation': The Italian Reform of Intergovernmental Finance (December 7, 2011). SERIES Working Paper No. 38. Available at SSRN: https://ssrn.com/abstract=1969872 or http://dx.doi.org/10.2139/ssrn.1969872

Contact Information

Ernesto Longobardi (Contact Author)
University of Bari ( email )
Piazza Umberto I
Bari, 70121
+390805049103 (Phone)
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