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Unformatted text preview: n. Briefly, this article shows that when a region grows poorer from the
standpoint of personal income tax, its share of the personal income tax transfer diminishes but the equalizing transfer from which it benefits increases
in such a way that the financial loss stemming from the first component is more than offset by the gain through the equalizing transfer. All things being
equal, a region whose inhabitants grow poorer enjoys an increase in budgetary revenues.
The reduced growth rate was initially set at 90% of GNI during preparatory deliberations, based on a calculation designed to cancel the losses of the
poorest regions. The negotiators ultimately opted for 91% of GNI, which reflects a determination to give the appearance of consistency to the special
financing act that would result from the negotiations. The 91% figure appears in communities’ financing formula but, in this instance, it is a figure
based on real estimates, as we explained in section 2.2.1. Thereassez sans cela was no justification for adopting this figure, with the result that
confusion now reigns in respect of this already sufficiently complex draft special act. 215 Commission on Fiscal Imbalance for a larger portion of its revenues, but the mechanism applies to the three regions. It is in this perspective that the safety
net was introduced.
The safety net’s relatively simple principle is set out in section 17, §2 of the special act of July 13, 2001 and consists in
compensating the regions whose revenues form the new regional taxes change too unfavourably in relation to the
negative term that they relinquish to the federal government. However, the main objective of this idea was lost during its
technical implementation. It has been stipulated that if the total revenues from the newly transferred regional taxes
decline nominally below the average between 1999 and 2001 (in 2002 BEF), the region concerned will be compensated
for the difference between this average and actual revenues. Compensation is integral for the first five years and
decreases gradually over the five subsequent years, after which time the mechanism will be eliminated. This safety net
obviously plays only a political role since, were it to be applied one day, it would mean that a region had experienced a
genuine fiscal catastrophe. Since the amounts in respect of 2007, for instance, will be compared in nominal terms to an
amount in 2002 BEF, revenues will have to have declined by more than the accumulated inflation between 2002 and
2007 before the region benefits from the mechanism.
Table 4.4. illustrates the functioning of the safety net. It indicates revenues from the old regional taxes in the Brussels
region from 1991 to 2000 and we simulate what Brussels would have received in the form of a safety net transfer had
the safety net been introduced in 1994. To this end, we have calculated the average regional tax revenues between
1991 and 1993, expressed in 1994 BEF. We thus obtain the reference amount of 9788.2 millions BEF, with which total
revenues for 1994 and subsequent years will be compared. Each year for which this amount exceeds total regional tax
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