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Unformatted text preview: that there are 27 laws,
with obvious problems of competition, co-ordination and harmonisation (DAFFLON, 1986 and section 5 below). ♦ The autonomy of the communes to manage their finance varies from one canton to another. In principle, the Cantons
regulate the financial room for manoeuvre of their communes by establishing budget principles, uniform accounting model,
taxation rules and debt limits. Local governments have a limited tax sovereignty in that they can choose between ability-topay taxes and user charges where appropriate. They are however tied to the tax system of their Canton. For many taxes,
local governments have only tax flexibility: they must apply the cantonal laws and limit their decision to an annual coefficient
of taxation [Kcommune] in percentage of the Canton's taxes. Local taxation is also compulsory for a limited number of taxes. ♦ If a commune chooses to raise user-charges and fees, it can also define the main components (object of taxation, circle of
users and thus payers, computation of the user charge base and the tariff), however within the limits set by case law of the
Federal Court of Justice (KNAPP, 1982, pp. 358-364). The objectives of fiscal sovereignty are:
(1) To enable each level of government and each government within a level, to finance its own budget independently and
according to its own criteria. This includes the capacity of financing public services in response to the preferences of their
own electorate (the "choice" model) as well as those expenses which correspond to minimum standard (merit) goods and
services set by a higher level of government (the "agency" model), net of conditional grants. 72 Commission on Fiscal Imbalance (2) To decide redistributive policies: first in selecting ability-to-pay or benefit taxation; second, in choosing the magnitude of
redistribution, for example, through the tax rate schedules or the amounts of exemptions and deductions on the income tax
(subject to the limits described in section five).
These, however, create two problems. One is tax competition. The other is the necessity of an equalisation policy
(between the centre and the cantons; and within a canton, between the canton and the communes) because of
disparities in the tax burden which do no correspond to objective differences in local government functions, but to their
geographical position off the main economic centres. 3.4.3. Direct access to many revenue sources An important characteristic of fiscal sovereignty is direct access to many (fiscal) sources. In table 7, several finance
sources are listed respectively for the federal government, the Cantons and the communes.
Direct access to a number of diversified tax or non-tax sources secures regular annual receipts compared with a
situation where a government can rely on one tax only. It enables a better distribution of the fiscal burden and avoids
exasperating particular categories of taxpayers in case of higher fiscal needs. This can also be understood in the view of
the low dep...
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