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Unformatted text preview: onal income tax revenues in a Region affect the means at the disposal of the other
Regions. This externality can assuredly not be overlooked in a federation comprising only three federated entities.
Indeed, [ ∂R j
= − X − 468(1 + p ) 100 POP tot
(IPP tot )2
where k denotes the Region in which personal income tax revenues have changed, where the term in square brackets is
limited to X if the Region j does not benefit from the national solidarity measure.
The sign of this term between square brackets is obviously crucial to a comparative statics exercise. In the comparison
conducted by Cattoir and Verdonck, it is negative in the two Regions that benefit from the national solidarity measure,
i.e. the Walloon and Brussels-Capital Regions. This makes it possible to establish Table 5 below, for the permanent
phase of the application of the law respecting financing of 1989, i.e. the year 2000.
EFFET D’UN ACCROISSEMENT DES RECETTES D’IPP DANS UNE RÉGION
+ ∆ IPP in reg. j
+ ∆ IPP in W. Reg.
∆ IPP in Fl. Reg. ∆R in W. Reg. ∆R in Fl. Reg. ∆R in Br. Reg. ∆R federal level - - + +++ + + + ++ - - +++ + +
∆ IPP in Br. Reg.
Source: Cattoir and Verdonck (1999) (I have simplified the presentation). As the authors have noted, it is clear that “the federal government is the biggest winner when personal income tax
revenues increase at the regional level.” This situation arises, first and foremost, because the federal government
returns only part of the personal income tax that it collects to the Regions and because, if the increase occurs in a
Region benefiting from the national solidarity measure, the transfer in this respect to the Region diminishes. This
explains why the effect on the means of the federal government is more important (+++) if the increase in personal
income tax revenues occurs in the Walloon or Brussels-Capital Region than in the Flemish Region (++). For the rest, we
can conclude, as do the authors cited, that “aside from a paradox concerning revenues, i.e. an inversion of per-capita
revenues relative to the Regions following the implementation of equalization, the inter-regional equalization system also
leads to poverty traps that are especially important for the Regions benefiting from equalization. […] In other words, any
economic catching-up that leads to an increase in taxable income in one of the two Regions is immediately punished by
a loss of tax revenues in these Regions.” (our translation) 4.2. Financing of the Communities
The funding base of the French-speaking and Flemish Communities is, even more so than for the Regions, centred on a
transfer from the federal government related to three taxes, i.e. the radio-television fee, personal income tax and, above
all, the value-added tax (VAT). According to the typology used earlier, there is an absence of fiscal autonomy since the
financing of the German-speaking Community relies on aid that is not connected to a tax.
The radio-television fee is refunded according to the location of the applia...
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