Does Fiscal Responsibility Undermine Federalism? The case of Belgium Vincent DEFRAITEUR Salzburg (Austria) Octobre 2007

What are the (main) characteristics of the Belgian Federalism?

Characteristic 1 –Two types of entities… 3 Communities 3 Regions the Federal level  6 governments and 6 Parliaments – …which overlap  Brussels is a part of the 2 Communities

The Communities & Regions

Charateristic 2 –Constitution : the special Law –2 majorities required 2/3 of the Assembly including ½ of each linguistic group  the agreement of each community is required to change the State (and the financing)

Characteristic 3 –Federalism of dislocation steps by steps 1830 : pure unitary state 5 reforms (1970 – 2002) Win-win system (consensus)

Fiscal Autonomy: what does that mean? The entities have a financial autonomy But fiscal autonomy? 3 kinds : –Complete autonomy (basis, rate and exemptions) –Rate autonomy (can only define the rate) –Margin autonomy (can levy additional taxes or allow a discount)

The Regions Large complete autonomy given by: –the Constitution (if space yet…) –the special law (on former federal taxes) Large margin autonomy given by special law: –Can allow a discount of 6.75 of the income tax… –  theoretical difference of 13,5 %… Conclusion : large autonomy

The Communities Constitution consecrates fiscal autonomy : –if space yet (such as the Regions ) –BUT impossible to implement (Brussels) ! Special law created a tax (television) –  also impossible in Brussels –Tax given to the Regions in 2001! Conclusion : no fiscal autonomy !

Conclusion Does fiscal autonomy legislation undermine federalism… … in Belgium? NO for two reasons

First Reason Federalism of dislocation –What reinforce the entities is not going against Federalism because it was born from the same movement –>< European Union and the €

Second Reason No hegemonic behavior Obligation to find a compromise (special law) –Ex. : Regions and Communities: two logics Economic Cultural –If too difficult : problem in the fridge for a few years The Brussels Region stayed 19 years in the fridge !

What next? Prospective view Election on June 10, 2007 Today : no government… The winner of the elections does not succeed…

What next? Because Flemish parties ask for a new reform of the state including a larger (fiscal) autonomy >< French speaker parties… Where the problems come from?

What next? 2 problems between the 2 communities : –Political choices are different –Economic situations Most Flemish asks concern… money. Only solution : the equalization of the 3 situations…

Conclusion Is it catastrophic? It has already been more difficult But a change is required in the South Politicians have changed: new generation Wait for new general elections in 2009 en then…

Conclusion Is Belgium specific? No. Facing years of structural problems, central structures seem to be unable to bring solutions We look for an other level of action in a subsidiary way of thinking We observe in many countries two kinds of tensions to re-allocate competences

Conclusion Two pressions: –Centripetal in favor of international organisations (trade,…) –Centrifugal in favor of the infra-state entities France, UK, Italia, Spain…Belgium. Difference : a little bit more difficult because of the close cohabitation

The end Thanks you.