IREF - Institute for Research in Economic and Fiscal issues
Fiscal competition and economic freedom
Abstract: The paper illustrates the evolution of the territorial system of government in Italy. A traditionally centralized state is turning into a quasifederation. The reasons underpinning this transformation are the growing insatisfaction with the inefficiency of the central government, the quest for autonomy by the fastest growing regions and the opposition by the latter to the interterritorial redistribution of resources made by the central government with the use of nontransparent and inefficient instruments.
A substantial degree of subnational tax autonomy has been reintroduced. The powers of subnational governments have been expanded. The main impact on decentralization derives, however, from the direct, popular, election of mayors and of presidents of regional and provincial governments. The transformation is far from complete. The central government is still reluctant to relinquishing its powers. The increased local tax autonomy did not yet introduce substantial tax competition. More precisely, tax rates were not reduced, but rather increased, due to the fiscal stringency of the whole public sector.