Unformatted text preview: benefit in respect of low income individuals.
For the French-speakers, this second interpretation was incompatible with the requirements of the special financing act
about the safeguard of the economic and monetary union. Indeed, even if this first use of regional autonomy with respect
to personal income tax altered the progressivity of the tax in a way to benefit the low income individuals, it opened the
way to an reverse situation and could finally threaten the economic and monetary union.
Second, the federal government’s jurisdiction over the progressivity of the tax was invoked to counteract the possibility
of granting lump sum refunds that altered the progressivity of the tax. However, it should be noted that no legal trace
exists of a federal monopoly on the progressivity of the tax.
Third, even if the interpretation of the Saint-Éloi agreement had been unanimous, the text defined solely the limits to
regional autonomy for 2000, bringing no solution for the years ahead.
Finally, Flanders, which was seeking the utmost fiscal autonomy, wanted to go beyond the Saint-Éloi agreement in order
to avoid the opinion of the consultative committee in respect of any change in its policy governing personal income tax. 3.2. Future prospects
3.2.1. Contents of the agreement The political agreement of October 16, 2000 already established the four key principles to be applied when fiscal
autonomy in respect of personal income tax was implemented, as the following excerpt reveals.
“[…] The limitations on the tax jurisdiction of the regions respecting personal income tax must be established
unequivocally in the special financing act. These limitations are indicated below.
The special financing act shall set a margin within whose limits the regions may grant piggyback taxes or refunds as a
percentage or in lump sum amounts that may or may not be differentiated by tax bracket or apply general tax deductions
related to their fields of jurisdiction. This margin stands at 3.25% as of January 1, 2001 and 6.75% as of January 1,
2004. The special act shall stipulate that the regions will exercise such tax jurisdiction without reducing the progressivity
of the personal income tax and while excluding unfair tax competition.” [our translation]
Based on the special act of the Lambermont agreement (that goes beyond the political agreement of Sainte-Thérèse),
we indicate below the principles governing the new autonomy in respect of personal income tax and its practical
implementation. 205 Commission on Fiscal Imbalance a) Limits of fiscal autonomy
The first principle set out in the Sainte-Thérèse agreement is that beyond the piggyback taxes or refunds stipulated in
1989 and 1993, regional autonomy may henceforth take the form of general lump sum reductions instead of
proportional ones (characteristic of the piggyback taxes). Furthermore, tax deductions related to the regions’ fields of
jurisdiction are permitted, with a view to allowing the regions to make use of the tax tool to see through regional
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