This preview shows page 1. Sign up to view the full content.
Unformatted text preview: Capitale Region, which is
both a city and a federated state, for urban cantons and the city-states of Germany (Bremen, Berlin and Hamburg)
where many workers enjoy services without paying for them. Otto Beierl suggests dealing with this problem through noncentralized, bilateral mechanisms. According to Magali Verdonck, the tax rates governments apply often take into
account the relative mobility of tax bases. For instance, the property tax base has little mobility and is local in the
countries studied. Some suggest that it would be useful to apply the criterion of relative mobility of tax bases in the
allocation of tax fields, but this criterion has its limits in a federal context. One of the conditions of fiscal sovereignty of
federated states is, as Bernard Dafflon notes, access to a large number of tax fields.
Some authors also mention that full fiscal autonomy of federated entities can hamper a country’s macroeconomic
stability, though, according to Robert Ebel:
Recent studies on the relationship between fiscal federalism and macroeconomic governance find that
‘decentralized fiscal systems offer a greater potential for improved macroeconomic governance than
centralized fiscal systems’. In fact, highly decentralized federal countries, such as Switzerland,
Germany, Austria, and USA, have very stable macroeconomic performance and low rates of inflation
Lastly, if the only fiscal resources of federated states are those generated within their territory, significant disparities in
taxation and delivery of public services can result. The yield of the main taxes typically differs among regions of a
federation. In other words, there are disparities in fiscal capacity among federated states that can be reduced through an
equalization mechanism. Many authors described how each federation deals with the issue of balancing fiscal autonomy
with interregional fiscal solidarity and how each federation proposes to resolve this problem. 2.2.2. Intergovernmental Transfers and Shared Taxes Revenue and spending can also be linked through intergovernmental transfers or by sharing the proceeds of federal
taxes. These transfers are generally made by the federal government to the federated states, though there are some
cases where the transfers are made in the other direction. For instance, in Switzerland, the cantons pay a contribution to
the federal government to fund social security, which lies within federal legislative jurisdiction. In Spain, Navarre and the
Basque Country collect almost all taxes within their territory and then pay a share (the cupo) to the central state
depending on the services the latter provides.
Intergovernmental transfers result in particular from the discordance, between the two orders of government, between
own-source revenue and spending. In the case of federations, this disparity stems from the constitutional division of
jurisdictions and tax fields. David Collins refers to this when he talks about vertical fiscal imbala...
View Full Document