Abstract
The study aims at integrating the discussion on the role of fiscal constitutions as a determinant – among other factors – not only of financial relations but also of the inherent dynamics of a federal system (Palermo, Kössler 2017: 8–9).
Today, many federal systems encounter a loss of solidarity and an upsurge of interregional disparities. These have exacerbated dormant tensions and intergovernmental conflicts. Although conflicts arise from multiple factors, equalization mechanisms have a key-role in this respect. Widening regional inequalities can be considered as one of the drivers of the increasingly conflictual nature of intergovernmental financial relations.
Against this background, the chapter explores the different set of legal tools that can be traced back to the category of ‘equalization mechanisms’. This is done by exploring from a comparative and legal perspective the rules that design and govern different systems of equalization, having regard to the institutional actors and the decision-making procedures with the aim to assess the participation of subnational governments in making equalization-related decisions. Basic assumption is that institutions and procedures governing equalization mechanisms are determinants of the nature of financial relations. The idea is that the level of government in charge of defining the scheme of intergovernmental transfers, the existing guarantees and the institutions that govern intergovernmental relations and settle intergovernmental conflicts are central features of a system and its functioning (Bahl 2000, 429). Accordingly, ‘a grant system must be designed to avoid well-known, undesired drawbacks’ (Ambrosanio et al. 2018: 123).
Although some steps ahead have been made to examine decision-making procedures in fiscal - and financial - related matters (Blöchliger and King 2006, 166–7), equalization mechanisms are often a neglected topic of comparative constitutional studies in fiscal federalism.
A case-study approach is adopted in addressing this issue. The different federal systems of interest have been identified with the aim to portray the existing variety of ‘architectural’ solutions, ie., including in the spectrum of analysis the different paradigms that can be detected around the globe. According to this line, the following cases will be investigated: Australia as the prototype of tax-revenue sharing on a ‘technical base’ (Commonwealth Grants Commission), Canada representing also in financial-related matters the paradigm of federal-provincial diplomacy with little, if any, legal entrenchment, Germany as the prototype of tax-revenue sharing on a ‘legislative-assembly base’ (Bundestag+Bundesrat), Spain with the quasi-constitutional institutionalization of the CPFF as a forum for intergovernmental financial relations.
The cases will be investigated integrating a static dimension - If, where and to what extent is inter-territorial solidarity regulated? - with a dynamic dimension - Who makes the rules? Who can amend them against which constraints? This is done looking at the fiscal constitutions, i.e., the constitutional documents, the implementing legislation, as well as the existing intergovernmental agreements, with the aim to (try to) give an answer the following questions.
Is there any constitutional entrenchment? Are equalization mechanisms/revenue-redistribution tools embedded in the constitutional document, or in other legal acts (of what type)? To what extent are decisions left to the political bargain? Are there any constitutional/legal constraints? What is the role of IGR-agreements and practice?
How are rules approved and amended? Unilaterally from the center or with direct (or indirect) participation of SNGs? How does their involvement look like in practice? Is the participation of SNGs in the rule-making process of binding or non-binding nature from a legal but political perspective?