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ABSTRACT
The growth and variability of regional taxes: an application to Italy. Regional Studies. This paper investigates the potential long-term growth and short-term cyclical stability of the Italian regional tax system. Short- and long-run elasticities with respect to regional gross domestic product (GDP) are estimated between 2001 and 2012 for the surtax on central personal income tax (RPIT) and for the regional tax on productive activities (RTPA). Cyclical reactions are more marked for the RTPA and higher in the southern regions. Significant long-run growth of the RPIT and RTPA, on the other hand, is found only in the northern regions. The results suggest that the behaviour of regional taxes may increase the Italian north–south gap and cast some doubt on these taxes in financing essential public services, such as health, in each region.
摘要
区域税收的成长与变化：意大利的应用。Regional Studies. 本文探讨意大利区域税收系统的潜在长期成长与短期週期性稳定。本文为中央个人所得税（RPIT）的附加税与生产活动的区域税收（RTPA），评估2001年至2012年间有关区域的国内生产毛额（GDP）的短期与长期弹性。週期性反应对RTPA来说更为显着，并且在南部区域中更高。此外，RPIT与RTPA显着的长期成长，只有在北方区域中发现。研究结果显示，区域税收的行为，可能会增加意大利的南北差距，并对于在各区域中以这些税收支持诸如健康等公共服务产生若干质疑。
RÉSUMÉ
Expansion et variabilité des impôts locaux: une application à l’Italie. Regional Studies. La présente communication se penche sur l’expansion potentielle à long terme et la stabilité cyclique à court terme du régime fiscal régional en Italie. On y procède à une estimation des élasticités à court et long terme relativement au produit intérieur brut (PIB) de 2001 à 2012 pour la surtaxe sur l’impôt centralisé sur les revenus personnels (RPIT), et pour l’impôt régional sur les activités productives (RTPA). Les réactions cycliques sont plus prononcées pour le RTPA, et plus élevées dans les régions méridionales. Par contre, on ne relève une croissance significative à long terme des RPIT et RPTA que dans les régions septentrionales. Les résultats indiquent que l’évolution des impôts régionaux est susceptible de renforcer l’écart entre le nord et le sud du pays, et mettent en doute la capacité de financement, dans chaque région, de certains services publics essentiels, par exemple la santé publique, avec ces impôts.
ZUSAMMENFASSUNG
Wachstum und Variabilität von Regionalsteuern: eine Anwendung auf Italien. Regional Studies. In diesem Beitrag untersuchen wir das potenzielle langfristige Wachstum und die kurzfristige zyklische Stabilität des regionalen Steuersystems in Italien. Hierfür schätzen wir die kurz- und langfristige Elastizität hinsichtlich des regionalen Bruttoinlandsprodukts (BIP) im Zeitraum von 2001 bis 2012 für die Zusatzsteuer zur zentralen persönlichen Einkommensteuer (RPIT) sowie für die Regionalsteuer auf Produktionstätigkeiten (RTPA). Zyklische Reaktionen fallen für die RTPA ausgeprägter und in den südlichen Regionen höher aus. Ein signifikantes langfristiges Wachstum der RPIT und RTPA ist wiederum nur in den nördlichen Regionen zu finden. Die Ergebnisse weisen darauf hin, dass das Verhalten der Regionalsteuern das Nord-Süd-Gefälle Italiens vertiefen kann, und lassen Zweifel an der Eignung dieser Steuern zur Finanzierung von wesentlichen staatlichen Leistungen wie dem Gesundheitswesen in den einzelnen Regionen aufkommen.
RESUMEN
Crecimiento y variabilidad de los impuestos regionales: una aplicación en Italia. Regional Studies. En este artículo analizamos el posible crecimiento a largo plazo y la estabilidad cíclica a corto plazo del sistema fiscal regional en Italia. Para ello calculamos las elasticidades a corto y largo plazo con respecto al producto interno bruto (PIB) regional entre 2001 y 2012 para el recargo regional en el impuesto central sobre la renta de las personas físicas (IRPF) y para el impuesto regional sobre las actividades productivas (IRAP). Las reacciones cíclicas están más marcadas por el IRAP y son más altas en las regiones del sur. Por otra parte, observamos que un crecimiento significativo a largo plazo del IRPF y las IRAP ocurre solamente en las regiones del norte. Los resultados indican que el comportamiento de los impuestos regionales puede aumentar las diferencias entre el norte y el sur de Italia, y ponen en entredicho que estos impuestos puedan financiar los servicios públicos esenciales, tales como sanidad, en cada región.
ACKNOWLEDGEMENTS
The authors thank the associate editor and two anonymous referees for their insightful comments on the paper. Special thanks are due to Joan Maria Mussons, Miriam Hortas-Rico and Elisa Tosetti for their helpful suggestions and discussions. All remaining errors are the authors’ own. A previous version of this paper was circulated as ‘The growth and variability of local taxes: an application to the Italian regions’ (GEN Working Paper No. B 2016-1).
DISCLOSURE STATEMENT
No potential conflict of interest was reported by the authors.
SUPPLEMENTAL DATA
Supplemental data for this article can be accessed at https://doi.org/10.1080/00343404.2017.1313400.
Notes
1. This is also due to the fact that the possibility to resort to alternative financing sources – such as debt – is more limited everywhere for subnational governments than for national governments.
2. Usually, corporate income taxes experience the greatest short-run variability, followed by personal income taxes, sales taxes and excise taxes (Sobel & Holcombe, Citation1996; Garrett, Citation2009).
3. As noted by Rodden and Wibbels (Citation2010), existing comparative studies are indeed more prone to emphasizing the role of national tax-transfer systems as a whole in cushioning asymmetrical regional shocks rather than focusing on single tax instruments at subnational levels.
4. The focus on regions is justified by the fact that even though a certain degree of taxing power has been recently left to provinces and municipalities, the major changes refer to regions (e.g., Constitutional Law 3/2001, Law 42/2009).
5. Since 2001, the Italian National Health Service (NHS) has implemented decentralization reforms in health management by assigning more responsibilities to subnational governments (basically, regions). The NHS provides essential levels of health services (ELS) to the whole population. The ELS are defined and financed by the central government but provided by regional authorities.
6. Irap and Addizionale Regionale IRPEF in Italian.
7. This tax is also applied to all public entities (state, regions, provinces and municipalities).
8. Over the last few years, deductions in labour costs have progressively increased. These provisions, however, do not affect the time span of our analysis.
9. We mainly focus on the OSRs since the special statutory regions (SSRs) are characterized by different financing mechanisms mostly based on the devolution to these regions of all taxes collected in their territories. However, we also include the SSRs in the empirical analysis for robustness purposes.
10. On average, the public RTPA provides 25% of total revenue, with a peak of 32% in Lazio, where the bulk of the public administration is located. It is applied with a fixed rate of 8.5%, thus differing from the standard rule for the RTPA on private activities.
11. Percentages slightly different from both the ordinary minimums and maximums (2.9% and 4.9%, respectively) are due to the conversion procedure between 2008 and 2009 when the base tax rate decreased from 4.25% to 3.90%. Thus, the reduction in the range of variation – calculated according to the ratio between 3.90% and 4.25% – would go from 1.0 to 0.92 percentage points.
12. In fact, the opportunity to change the tax rate was seldom used until 2004 since regions had been prevented by financial law (L. 289/2002, L. 350/2003 and L. 311/2004) from increasing both the RTPA and RPIT, a limit that has been removed from 2004 onward.
13. In other words, one variable can move up in the same period in which another is moving down simply because the variables deviated from the levels implied by their long-run relationship.
14. Equation (1) is obtained by adding the error-correction term derived from a long-term equation (where variables are considered in levels) to a short-term equation (where variables are considered in differences), suggesting that deviations from the long-run pattern of the tax base may have an impact on the short-term tax base.
15. One shortcoming of including time fixed-effects is that they may capture part of the cycle (i.e., the part common to all regions). However, if we do not include time fixed-effects, an omitted variable bias may occur, compromising our estimations more heavily.
16. In this vein, Hines (Citation2010) uses variables in per-capita terms to investigate how differently federal, state and local tax revenues respond to the business cycle. More recently, Riedl and Rocha-Akis (Citation2012) used per-capita corporate income tax bases to estimate tax-base elasticities with regard to domestic and foreign competing countries’ tax rates in OECD countries.
17. After observing the residual correlation over time, we use a two-lag correction for autocorrelated errors. Results are also robust to increasing the lag structure up to three (not reported in the paper).
18. The routine developed by Ditzen (Citation2016) introduced a new Stata command, xtdcce. In detail, we apply the recursive mean adjustment bias-correction method that does not require any knowledge of the error factor structure and can be applied to the mean group estimates (Everaert & De Groote, Citation2016) by removing the partial mean from all variables. The partial mean is lagged by one period to prevent it from being influenced by contemporaneous observations (Chudik & Pesaran, Citation2015).
19. The estimated upper bound of the confidence interval with a DK-FE estimator is 0.389. The corresponding upper bound with DCCE estimator is 0.782.
