Tax autonomy and
decentralisation in OECD
countries.
Network on Fiscal relations
across levels of Government
José Maria Piñero Campos
OECD Fiscal Federalism
INDEX
• Tax autonomy and decentralisation
– Tax decentralisation
– Tax autonomy
– Tax Decentralisation vs. Tax Autonomy
– Tax autonomy structure
– Pros and cons of tax Autonomy
– Tax Autonomy and disparities
– Tax autonomy and tax rate evolution
• Network on Fiscal relations across levels of government
– Documents
– Workshops
– Statistical databases
– Current Tasks
States/regions
Municipalities
Netherlands
Ireland
Greece
United Kingdom
Hungary
Spain
Belgium
Luxembourg
Korea
Portugal
Germany
Norway
Japan
Italy
France
Finland
Czech Republic
Denmark
Switzerland
Austria
Sweden
Austria
Switzerland
United States
Spain
Canada
Germany
Belgium
Tax Decentralisation
% of total revenues
80
70
60
50
40
30
20
10
0
States/regions
Municipalities
Ireland
Austria
Czech Republic
Greece
Netherlands
United Kingdom
Hungary
Portugal
Germany
Korea
Italy
Belgium
Spain
Luxembourg
France
Japan
Norway
Finland
Denmark
Switzerland
Sweden
Austria
Germany
Belgium
Spain
Switzerland
United States
Canada
Tax Autonomy
% of total revenues
70
60
50
40
30
20
10
0
Tax Decentralisation vs. Tax Autonomy
Autonomous tax revenues (% of Total revenues)
70
65
Sweden LOC
Canada STA
60
Switzerland STA
55
Switzerland LOC
United States STA
Denmark LOC
Finland LOC
50
45
Norway LOC
40
Japan LOC
35
Spain LOC
30
Luxembourg LOC
Belgium LOC
France LOC
Italy LOC
Spain STA
Korea LOC
Germany LOC
25
20
Hungary LOC
15
Portugal LOC
United Kingdom LOC
Netherlands LOC
Greece LOC
10
5
0
0
Ireland LOC
10
20
Czech Republic LOC
30
40
Austria STA
50
Germany STA
Austria LOC
60
70
Tax revenues (% of Total revenues)
Ideal Tax autonomy structure
• Taxes which are growth-enhancing at sub-central level
are the same as the ones which are growth-enhancing at
central level
• But, there are some additional requirements :
–
–
–
–
–
Link between taxes paid and public services received
SCG Taxes should be non-mobile
Non redistributive
Non cyclical
Tax base should be evenly distributed across jurisdictions
Ideal Tax autonomy structure
• Property Taxes
• Personal Income Taxes
– redistributive
• Consumption Taxes.
– Divert taxes among jurisdictions
• Corporate Income Taxes
– Highly cyclical,
– Geographically concentrated
States/regions
Municipalities
Ireland
Austria
Czech Republic
Greece
Netherlands
United Kingdom
Hungary
Portugal
Property
Germany
Italy
Korea
Belgium
PIT
Spain
Luxembourg
Consumption
France
Japan
Norway
Finland
Denmark
CIT
Switzerland
% of total revenues
Sweden
Austria
Germany
Belgium
Spain
Switzerland
United States
Canada
Real Tax autonomy structure
Others
70
60
50
40
30
20
10
0
Pros and cons or Tax autonomy
• Pros
– Make governments more responsive to citizens’ tastes and
preferences
– Improve budget management efficiency. A more reduced size of subcentral governments have been reported (Rodden (2003), Fiva
(2006), Sorens (2008))
– Promote democratic accountability
– Provide incentives for growth-oriented economic and fiscal policies
– Could reduce disparities when small jurisdictions could benefit from
bigger neighbour jurisdictions
• Cons
– Could increase disparities. If equalisation is not enough poorer
jurisdictions could be obliged to do a bigger effort
– Could deteriorate SCG revenues (race to the bottom).
– Could deteriorate SCG fiscal stability, if it is based on more volatile
taxes as Corporate or consumption taxes
Tax Autonomy and disparirites. What
happen when equalisation is small?:
Implicit tax rate (in % of average)
200
180
Implicit tax rate (in % of average)
200
CANADA S/R
SWITZERLAND S/R
180
2006
160
160
140
140
120
120
1997
100
100
80
80
60
60
40
40
20
20
0
0
0
30
60
90
120
150
180
210
240
270
2006
1998
0
300
30
60
90
120
150
Tax raising capacity per capita (in % of average)
Implicit tax rate (in % of average)
200
2007
180
Tax rate (in % of Regional average)
200
FRANCE (Departments)
180
210
240
270
300
Tax raising capacity per capita (in % of average)
CASTILLA LA MANCHA
(Municipios de más de 10.000 hab.)
180
160
160
140
140
2002
120
120
100
100
80
80
60
60
40
40
20
20
0
0
0
30
60
90
120
150
180
210
240
270
300
Tax raising capacity per capita (in % of average)
0
30
60
90
120
150
180
210
240
270
300
Tax raising capacity per capita (in % of average)
Tax Autonomy and disparirites. What
happen when equalisation is high?:
Implicit tax rate (in % of average)
200
Implicit tax rate (in % of average)
200
DENMARK LOC
180
FINLAND LOC
180
160
160
140
140
1997
120
1997
120
100
100
2007
80
2007
80
60
60
40
40
20
20
0
0
30
60
90
120
150
180
210
240
270
300
0
0
Tax raising capacity per capita (in % of average)
CIT and Property tax (CA or IMI) Implicit tax rate (in % of average)
200
90
120
150
180
210
240
270
300
Tax raising capacity per capita (in % of average)
SWEDEN LOC
180
160
160
140
140
120
120
2002
100
1997
100
2007
80
60
Implicit tax rate (in % of average)
200
PORTUGAL LOC
180
30
2007
80
60
60
40
40
20
20
0
0
0
30
60
90
120
150
180
210
240
270
300
Aggregate tax base per capita (in % of average)
0
30
60
90
120
150
180
210
240
270
300
Tax raising capacity per capita (in % of average)
Tax Autonomy and disparirites. What
happen when equalisation is very high?:
Implicit tax rate (in % of average)
200
SPAIN (Regions)
180
160
140
2006
120
100
1997
80
60
40
20
0
0
30
60
90
120
150
180
210
240
270
300
Tax raising capacity per capita (in % of average)
Tax autonomy and Tax rate evolution
CANADA
Implicit tax rate (%)
78.0
77.0
76.0
75.0
74.0
73.0
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2004
2005
2006
2007
SWITZERLAND
Implicit tax rate (%)
15.0
14.0
13.0
12.0
11.0
10.0
1997
1998
1999
2000
2001
2002
2003
FRANCE (Regions)
Taxe fonciere
Taxe profesionale
5.0
4.0
3.0
2.0
1.0
0.0
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Tax autonomy and tax rate evolution, an
ideal evolution?
Taxe foncière sur les propriétés bâties
mean
mean - stdev
mean + stdev
5.00
4.00
3.00
2.00
1.00
0.00
1987
1988
1989
1990
1991
1992
1993
Taxe foncière sur les propriétés non bâties
1994
1995
mean
1996
1997
1998
mean - stdev
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2001
2002
2003
2004
2005
2006
2007
2008
2001
2002
2003
2004
2005
2006
2007
2008
mean + stdev
12.00
10.00
8.00
6.00
4.00
2.00
0.00
1987
1988
1989
1990
1991
1992
1993
1994
1995
mean
Taxe profesionnelle
1996
1997
1998
mean - stdev
1999
2000
mean + stdev
5.00
4.00
3.00
2.00
1.00
0.00
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
OECD Network on Fiscal relation across
levels of government
• Created in 2003 and managed by 3 OECD Directorates:
– Tax Policy and Administration (CTP)
– Economics Department (ECO)
– Directorate for Public Governance and Territorial Development (GOV)
• Providing OECD countries with the analytical and statistical underpinnings
for decisions on how to organise the relationships among central, regional
and local governments
• A high level, multidisciplinary policy dialogue platform, between policy
makers for taxation and expenditure.
• Participants:
– 17 OCDE countries,
– 25 countries are providing statistical data and policy information
– The International Monetary Fund, the World Bank, the Council of
Europe and the European Commission participate in the Network
Fiscal Network. Documents
• Fiscal policy across levels of government in times of crisis
• Explaining the Sub-National Tax-Grants Balance in OECD Countries
• Finding the Dividing Line between Tax Sharing and Grants: A Statistical
Investigation
• The Fiscal Autonomy of Sub-Central Governments: An Update
• The Spending Power of Sub-Central Governments: A Pilot Study
• Taxes and Grants: On the Revenue Mix of Sub-Central Governments
• Market Mechanisms in Sub-Central Public Service Provision
• Promoting Performance: Using Indicators to Enhance the Effectiveness
of Sub Central Spending
• Fiscal Equalisation in OECD countries
• Intergovernmental transfers and decentralised public spending
• Fiscal autonomy of sub-central governments
• Fiscal rules for sub-central governments: design and impact
Fiscal Network. Workshops
• Tax competition at Sub-central level. Bern, May-June
2010
• Economic Crisis and Sub-central Fiscal Policy. Paris,
June 2009
• Taxes versus Grants. Vienna, May 2008
• Fiscal Equalisation in OECD Countries. Zaragoza, June
2006
• The Efficiency of Sub-central Spending. Paris, May 2006
Fiscal Network. Statistical database
• Intergovernmental transfers: update of National
Accounts data
• Taxing power of local and regional governments in
OECD countries
• Revenue structure of sub central government
• Intergovernmental grants
Fiscal Network. Current tasks
• Reforming Fiscal Relations across Levels of
Government:
– the way in which political and institutional factors influence the
design, decision-making process, adoption and long-term
implementation of fiscal federal reforms.
– Two kind of results are foreseen:
• A summary report with the basic elements to task into
account when reforming fiscal relations
• Some country case analysis
• Sub-Central Tax Competition:
– What means tax competition at sub-central level?
– What impact has the tax competition?
– What are the potential framework conditions to make it beneficial
for fiscal policy and fiscal outcomes?
Seminar about Fiscal decentralisation of
Public Administrations
Cartagena, 2-6 November 2010
In collaboration with Instituto de Estudios Fiscales
• To share Spain and OECD knowledge in fiscal federalism
• To create a policy dialog platform about the most relevant trends and the
exchange of experienceies and information about regional and local
financing, fiscal rules and budgetary discipline
The inscription is open till 24th September in the
Centro de Formation de la AECID de Cartagena de
Indias webpage:
http://www.aecidcf.org.co/aeci_cartagena/on_line/
Seminar about Fiscal decentralisation of
Public Administrations
Cartagena, 2-6 November 2010
ISSUES
• Sub-central governments financing: Basic principles. Tax financing and
transfer financing. International existing models.
• Taxes as financing source of sub-central governments. Taxes adequate
for decentralisation. Tax decentralisation and tax autonomy. Consequences of
tax decentralisation. Tax competition. Equalisation
• Fiscal decentralisation and budgetary stability. Budgetary consolidation.
Sub central governments debt.
• Management of a fiscal decentralised system. Responsibilities distribution.
Principles: institutional loyalty and co-ordination, transparency, etc.
Decentralized public services provision. Indicators, market mechanisms in the
provision of public services. The new technologies.