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Unformatted text preview: question today is whether the Lambermont agreement constitutes the step towards an accomplished federal state,
in the sense that the federated entities have the structural financial means necessary to fully carry out their
30 This table is converted in Euro in Appendix II
The source of the problem is well known, i.e. the financing mechanism stipulated in the special financing act of 1989 was inadequate.
The summary table in Appendix I lists these agreements. 203 Commission on Fiscal Imbalance 3. FISCAL AUTONOMY OF THE REGIONS WITH RESPECT TO PERSONAL INCOME TAX 3.1. Background
3.1.1. The special financing act of 1989 The special financing act of January 16, 1989 described the main sources of financing of the regions: the federal
“personal income tax transfer”, the equalization grant, the regional taxes and a specific purpose grant. The design of the
federal “personal income tax transfer” was the same as for the communities: an overall amount, defined in 1989,
changed annually in light of the growth of the consumer price index and the GNI growth, and was then attributed to the
regions according to each region’s contribution to federal personal income tax revenues. The equalization grant was
attributed to the regions having personal income tax revenues per capita below the national average. The regional taxes
are described in the following section. The specific purpose grant was a closed-ended matching grant from the federal
government to the regions. It is a compensation for each unemployed for whom the regions create a job and it should be
equal to the amount of unemployment benefits that the federal government does not need to pay anymore. In fact this
grant systematically reached the upper limit fixed by the federal budget. The remainder of the revenues of the regions
was composed of own fiscal revenue (different from regional taxes), non-fiscal revenues and debt.
Furthermore, the regions were granted the possibility of collecting piggyback taxes on the federal personal income tax
(expressed as a percentage of the amount of taxes paid by the taxpayer to the federal government). The special
financing act of January 16, 1989 stipulated that as of January 1, 1994, the regions could, in addition to levying
piggyback taxes, grant refunds provided that the amount of such refunds did not exceed the amount of the personal
income tax transfer attributed to the region . Section 9 of the special financing act stipulates that, with a view to
safeguarding the economic union and monetary unity, the federal government may impose a maximum percentage in
respect of the additional taxes and refunds by royal decree adopted following consultation with the governments
concerned. However, this maximum percentage has never been defined. 3.1.2. Circumstances leading to new negotiations The initial objective of the Saint-Éloi agreement on November 30, 1999 was only to define the new criteria for the
attribution of the federal VAT transfer between the communities and did not...
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