Italy: Law 42 on fiscal federalism

In 2009, the Italian parliament endorsed Law 42 on fiscal federalism, setting a milestone for Italy’s gradual move towards decentralisation and federal institutions. The law, which is based on a constitutional amendment passed in 2001, increased tax and spending autonomy of the regions, provinces and municipalities and overhauled the equalisation system, tackling the wide fiscal interregional differences in a consistent and efficient fashion (). A set of legislative decrees, some of which have not yet been implemented, determines intergovernmental tax arrangements, equalisation, fiscal rules and accounting harmonisation. The cost of the reform to both the central and sub-central governments is not yet known, but there is strong pressure for the reform to remain fiscally neutral.