commission on fiscal imbalance 合集

The budgetary impact on the regions is positive for

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Unformatted text preview: ative terms would have increased at the same pace as growth in GNI while the personal income tax transfers would have changed less (more) rapidly than growth in GNI for those regions whose share of personal income revenues decreases (increases). The personal income tax transfers of the regions that grow relatively poorer would have gradually been undermined while the other(s) earned a bit more each year. To summarize, differences in wealth are reinforced by any criterion of change applied uniformly to the three regions. This problem was pinpointed by the regions experiencing a drop in their share of personal income tax revenues, i.e. the Brussels and Walloon regions, and the authorities contemplated abandoning the notion of uniform change in respect of the three negative terms and implementing a regional change equivalent to growth in the respective personal income tax transfers. Thus, if the negative term represented x% of the personal income tax transfer in 2002, the same percentage was deducted from subsequent years and a separate percentage would be calculated for each region. The advantage of this measure is that growth in the total of the three negative terms is equivalent to growth in GNI. This measure has the same budgetary impact for the federal government as the preceding solution, but in this instance, the anti-redistributive effect is cancelled and double neutrality is achieved. Flanders rejected in extremis this new proposal, arguing that it did not wish to lose the gain tied to the first proposals, a gain that it had not in the least acquired. An additional argument maintained that a region whose share of personal income tax revenues declined would effectively have lost financial resources because of this change in the negative term. However, this state of affairs was acceptable since, at the same time, this region would have benefited from the 65 overcompensation afforded by the equalizing transfer. The compromise ultimately adopted consists in maintaining a uniform growth rate for the three regions, but by reducing 66 this rate in relation to the GNI rate, i.e. 91% of growth in GNI (more precisely, it is a link to inflation plus 91% of real growth in the economy). Thus, the regions that are relatively wealthier maintain an advantage over the other regions, while the losses of the regions that are relatively poorer are reduced to a minimum. Budget neutrality is no longer achieved, on the one hand by the federal government, which loses the difference between a link to 100% and a link to 91% of growth each year. The budgetary impact on the regions is positive for some and the losses virtually nil for the others. In a word, neither vertical budgetary neutrality nor horizontal budgetary neutrality is achieved. Given the anti-redistributive effect inherent in the final choice of linking changes in the negative term to a single rate of 91% of growth, the negotiators decided to implement a temporary insurance mechanism in respect of the regions. The risk of experiencing the negative effect of the new deal is greater for the Brussels region because regional taxes account 65 66 See Cattoir and Verdonck (1999) for an explanation of this phenomeno...
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This note was uploaded on 03/06/2013 for the course ECON 220 taught by Professor Paulo during the Spring '13 term at University of Liverpool.

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