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NUMERO 22 - 18/11/2009

 Introduction to italian fiscal federalism

With the 2001 reform of the Italian Constitution and in particular Title V thereof dealing with relations between central and local government, Italy has taken its first steps towards a federal system. In fact, Italy has gone from a regional system in which central government enjoyed all the powers combined with a limited role for local government to a system that can best be defined as 'federalist like' because the federalisation process has not yet been completed, especially in terms of establishing a house of parliament representing the interests of the regions, provinces and municipalities as such. A significant step towards the development and growth of the federal system in Italy will undoubtedly occur through implementation of fiscal federalism governed by article 119 of the Constitution. The fact is that up to now there has been a structural anomaly: the federal system has been achieved only in part relating to administrative functions (Bassanini Law) and legislative powers (reform of Title V of the Constitution) while the whole issue of funding has remained where it was before, based essentially on a model of grants made by central government. The effect of this asymmetry is that public spending (excluding pensions and interest) is at this point in time divided equally between central government on the one hand and the regions/local authorities on the other hand but the latter raise less than 18% of tax revenues.. (segue)

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