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Unformatted text preview: However, the possibilities would be limited in the latter domain because of constraints
imposed by Maastricht-based management of the deficit and debt. Under the circumstances, local authorities would find
it harder to gain access to the borrowing market. A return to the system of prior authorization for borrowing would even
be conceivable should a conflict arise with the State respecting the division of the authorized debt margin.
The dynamics of operating expenditures would lead to a substantial increase in developed property rates. Since the
bases would not be subject to any thorough revision of the cadastral assessments, a crisis would develop both with
respect to household and also to businesses. The last bulwark of local taxation would collapse and the State would take
charge of the proceeds from the only remaining local tax.
The centralization of local tax resources is complete. 5.2. The restoration of fiscal decentralization (Diagram 2)
The scenario concerning the restoration of fiscal decentralization assumes the conclusion of an agreement between the
State and the local authorities on a sweeping reform of direct taxes, which would automatically terminate the policy of
tax relief funded by the State. It would also lead to the reform of financial equalization, whose implementation is
intended, in particular, to rectify fiscal capacity unevenly distributed among the local authorities.
Tax reform would focus at once on tax bases, rules governing the setting of rates, and the map of fiscal divisions. The
State and the local authorities would share the considerable political cost. Local authorities would benefit from the
broadening and modernization of the tax bases, but in exchange, would agree to twofold control over their leeway with
respect to the setting of rates: each local authority would now only be able to freely set the rate of a single tax (the
principle of fiscal specialization) and, if need be, within an authorized range (the principle of the rate tunnel).
From a territorial standpoint, the progress of specialized intercommunal taxation would be spectacular and the fiscal
consolidation of the territories would accelerate. It would be accompanied by a broadening of jurisdictions. The
communes would survive despite rising intercommunal power but they would accept the reduction in their budgets and
fields of activity. Under the hypothesis adopted, the departments and regions would maintain their jurisdictions and
The overhauling of fiscal decentralization would depend, first and foremost, on the modernization of the tax bases. The
property tax system and real estate tax legislation are centred on the market value of properties or, at the very least, on
property and real estate bases that change over time, much as market values do. The housing tax would be eliminated
and local authorities would receive the proceeds from a broad-based local income tax, such that the one point of CSG
would essentially be equivalent to the loss of revenues resulting from the elimination of the housing tax. As is true of the
housing tax, the base of this income tax represent...
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