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Unformatted text preview: e commune of Berne (the capital
city of the Canton and also the federal city) an increase of the tax coefficient from a multiple of 2.2 to 2.4 of the cantonal direct taxes levied in the
commune. The reason was that the electorate of the commune had rejected for the third time the 1994 budget, which presented a deficit and required
for balance an increase of taxation. In Fribourg, the Canton controls on a yearly basis the books and the public debt of the communes. It intervenes if
the current account is not balanced or if amortisation of the debt and the effective reimbursement of loans are not sufficient according to legal
minimum rates. Cantonal intervention takes several forms, but it can go so far as to impose a higher tax coefficient to the commune at fault in order to
restore its financial situation. Commission on Fiscal Imbalance cantons in 1998 represented on average 6 per cent of total cantonal own revenues; and 7 per cent for the communes
(tables 6 and 7).
♦ Finally, there is also a large debate about the effectiveness of financial referenda on the size of the public sector, on the one
hand, and on the reinforcement of budget discipline, on the other hand (see section 2.3.) 4.2. Macroeconomic policy
The decentralisation of government functions raises problems for macroeconomic control at the national level. This is
because cantonal and communal accountability involves the access to own revenue sources together with the right of
the Cantons and the communes to borrow. Uncontrolled access to capital markets and mismanagement of the budgets
by cantonal and local government could jeopardise the efforts, if any, to stabilise the economy. For this reason, so the
textbook argument runs, central government ought to have some monitoring or control power. But one must distinguish
whether the assignment of responsibilities and revenues to the cantonal and communal tiers is in balance and regular,
or volatile and subject to strong cyclical variation. In the first case, control can be restricted to the golden rule, that
borrowing is allowed only for infrastructures, and the time-path of capital investment. In the second case, borrowing may
be needed not only for investment, but also to compensate for cyclical variation in the budget (higher social assistance
expenditures, with less revenue, in downwards cyclical turn).
Yet, effective decentralised public finance may be somewhat distant from the textbook theory. Stabilising tax
adjustments is a mere conjecture in the Swiss situation: the electorate has to vote the tax law at the cantonal level, or
the tax coefficient at the local level: while it may accept variation in taxation, whether to restore a balanced current
budget or for new investments, it is unlikely to do so just for macroeconomic reasons. In addition, the time path required
for such a decision is probably foreign to upward or downward changes in the macroeconomic trend.
On the other side, the economic classification of public expenditures, in table 6, gives an interesting first insight for
macroeconomic policy. At the federal level, current and capital grants-in-aid account for 59 % of total expenditures,
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