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Unformatted text preview: an estimate of the margins available to the federal government in future years. Such
estimates have been made assuming that the taxation system does not change and without taking into account an
eventual increase in the contributions of the member States to the financing of the European Union, for example
following the expansion of the EU.
To ensure that the federal government does not bear alone the cost of an increase in contributions to the EU, the
Sainte-Thérèse agreement makes provision for taking into consideration this factor in determining growth in the financial
resources of the communities. During negotiations leading to the Lambermont agreement, it was advisable, therefore, to
convert into figures this political intention included in the Sainte-Thérèse agreement.
This question, one of the vaguest in the Sainte-Thérèse agreement, was subject to lengthy debate. Tension between the
federal government and the communities overall was palpable. No entity wanted to renegotiate the matter each year.
However, the establishment of a fixed criterion risked proving unfavourable to one level of government or the other.
Annual change in the amounts equivalent to 91% of growth in GNI was finally adopted, based on anticipated
contributions, bearing in mind the higher cost expected in the wake of the broadening of the European Union. 25
27 A political agreement was reached in October 2000 (Ste Thérèse agreement) and its legal translation was made in January 2001 (Lambermont
agreement). Differences exist between those two steps.
The notion of gross domestic product has been replaced by that of gross national income in conjunction with the harmonization of national accounts
in Europe (SEC 95).
The same allocative criterion is applied to the personal income tax transfer earmarked for the regions, based on the derivation principle of taxation. 201 Commission on Fiscal Imbalance This final solution offers three advantages. First, it gives the communities the ability to forecast their revenues. Next, it
protects them against possible changes in agreements with the EU, in respect of which the communities are not
consulted. Furthermore, they are a stabilizing factor in respect of federal government spending since, when the increase
in its contributions to the EU is less than what it gains through the 91% link to growth in GNI, it may constitute reserves
and draw on them when the increase in its contributions exceeds this amount.
In addition to taking into account contributions to the European Union, the Sainte-Thérèse agreement stipulated that the
adjustment to growth would take into account change in the federal government’s real revenues. This arrangement
would have made the communities overly dependent on the reductions in federal fiscal pressure anticipated in
subsequent years. In this hypothetical situation, the finances of one level of government would have been wholly at the
mercy of decisions made by another level of government. Furthermore, the federal government would have benefited, at
least from a political standpoint, from a tax reform, while the cost of such a reform would have been shared by...
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