From transfers to tax “co-occupation”

This chapter provides insights into the current reform of intergovernmental fiscal relations in Italy. The most relevant change is the abolition of transfers as an ordinary means of sub-central government finance, except for equalisation. Since the room for autonomous local taxes is quite narrow, transfers will be mainly replaced by different forms of “co-occupation” of central taxes. Using the OECD taxonomy of tax autonomy, we show 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 effective discretion. The main problem is that both the central and the sub-central governments fear tax power decentralisation. The former because it feels that, at least in the transition period, the electorate might not properly distinguish the different fiscal responsibilities the latter because they would prefer not to tax their electorate.

Measuring Fiscal Decentralisation: Concepts and Policies

From transfers to tax “co-occupation”

The Italian reform of intergovernmental finance