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Unformatted text preview: ereas expenditures for personnel and interest payment correspond to 10 % and 7 % respectively. This means that
about 76 % of the total budget belong to categories of expenditures that are very difficult, if not impossible, to modify in
the short term for macroeconomic purposes. Consumption (11 %) and investments (2 %) amount to as low as 13 % of
the total federal budget. This is by no mean sufficient for any kind of functional finance.
With 19 % of total expenditure for consumption (11 %) and investment (8 %), the cantons are in a similar position.
Not surprisingly, one finds that the communes spend much more for consumption (20 %) and investment (13 %), up to
about 33 % of their total expenditure.
Because of the difficulty to act on personnel expenditures and transfers in the short term, one must recognise that any
macroeconomic policy cannot be driven by and at the Centre only. It requires some form of consensus between the
three government tiers and vertical co-operation. This is not an easy matter because regional and local interests are
divergent. In particular, more and more investment projects require important financial resources and long term planning:
when such a project is ready to be voted, it is doubtful whether any government will accept to postpone it for
macroeconomic reason. And inversely, it is not so easy to accelerate a project for macroeconomic reason without taking
the time to present a detailed investment programme. A canton or a commune may be very reluctant to abandon or
postpone an investment for the sake of a central co-ordinated macroeconomic policy. This explains also why the fiscal
and budget policy plays only a limited role in stabilisation, compared to the position of the monetary authorities through
the Swiss National Bank. 5. TAX CO-ORDINATION AND HARMONIZATION The extensive freedom in shaping the tax system enables each of the Cantons to determine the tax price level for a
specific bundle of public goods and services within its own jurisdiction. In the theory of fiscal federalism, Cantons and
communes may use their tax systems to compete for firms and individuals to migrate to another Canton or commune.
Yet, fiscal sovereignty is not unlimited. Allocative inefficiencies would arise if decentralised jurisdictions were to adopt
widely varying forms of taxation. Each individual and business firm would have an incentive to move in that jurisdiction
whose particular tax system gave him the best tax break. Under a non-neutral tax system, the location of individuals and
productive capital might be guided by particular pecuniary advantages afforded under varying kinds of taxes irrespective
of public provision. But tax competition between jurisdictions has no efficiency properties comparable to market pure
competition; it is rather in the nature of oligopoly (TULKENS, 1985, p. 45). Furthermore, it is not possible for subcentral
75 Commission on Fiscal Imbalance jurisdictions to decide a sharp redistributive policy through taxation. Acceptance of this policy will...
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