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Measuring Fiscal Decentralisation

Concepts and Policies

image of Measuring Fiscal Decentralisation

When trying to measure fiscal decentralisation, the OECD Network on Fiscal Relations Across Government Levels has made significant progress in the last years, especially on tax autonomy of sub-central governments. But in many respects, real-world fiscal decentralisation still escapes the measuring tools, especially when it comes to measure the spending power of sub-central governments or the various regulations attached to intergovernmental grants. This book deals with two interrelated issues. The first concerns  the various measurement of fiscal decentralization in general and their usefulness for policy analysis. The second and more specific issue concerns the taxonomy of intergovernmental grants and the  limits of the current classifications, and how policy changes to the intergovernmental grants framework may require that measurement devices be adapted.

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From transfers to tax “co-occupation”

The Italian reform of intergovernmental finance

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.

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