english version apers Federalism, Subsidiarity and Tax Evasion The role of Regional Governments in the European decision-making process between participation and responsibility orking P W 13 June 2011 Published “Working papers” 0/2003 Investments, research and innovation in the Veneto manufacturing sector. Results of the 2002 inquiry based on the sample of businesses of ‘The financial trends Jury’. June 2003. 1/2003 Support for female entrepreneurs. An analysis of the impact of the Law 215/1992 and of the Regional Law 1/2000. October 2003. 2/2004 Technical sub-supplier SMEs in Veneto. Results of the 2003 inquiry by the Sub-supplier Observatory – Technical Sector. April 2004. 3/2004 Investments and the economic cycle in Veneto. Construction of predic- tive indicators and assessment of their validity. May 2004. 4/2004 Crafts in Veneto: towards a more flexible labour market. Evolution of occupational structures in crafts businesses 1999-2004. November 2004. 5/2005 The new Basilea agreement on bank capital. Methodological framing and the potential impact on SMEs in terms of capital absorption. Sep- tember 2005. 6/2006 Jobs and professions in Veneto’s tourist sector. Professional figures and work perspectives in the tourist economic activities and services. Septem- ber 2006. 7/2006 The district manager in Veneto. The activities and competences of the managers and of the implementing actors of the district development pacts. September 2006. 8/2007 The costs of “non-federalism”. A comparison among Veneto, Italian re- gions and decentralization experiences in Europe. May 2007. 9/2008 Public spending and federalism. The allocation of human and financial resources and the efficiency of Public Administration. March 2008. 10/2008 Federalism and competitiveness. Towards reform for the social and eco- nomic development of Italy. September 2008. 11/2009 Responsibility and Federalism. Figures, ideas and remarks to speed up the realization of fiscal federalism in Italy. September 2009. 12/2009 Veneto read through companies’ balance sheets. Structure, economic- financial performance and taxation of limited companies. October 2009. 13/2011 Federalism, Subsidiarity and Tax Evasion. The role of Regional Go- vernments in the European decision-making process between participa- tion and responsibility. June 2011. 14/2011 The balance sheets of limited companies in Veneto. An analysis of economic-financial performance and taxation in the period 2006-2009. September 2011. english version CONSIGLIO REGIONALE DEL VENETO Federalism, Subsidiarity and Tax Evasion The role of Regional Governments in the European decision-making process between participation and responsibility Working Papers Working 13 June 2011 Overview Drafted with the support of the Veneto Region’s Regional Council and Government, this publication entitled “Federalism, subsidiarity and tax evasion” provides fresh ideas and suggestions to the debate on the role of regional governments in the European integration process. After the Treaty of Lisbon, the need to ensure a balanced institutional framework required each European Institution to limit their actions to the competences stated in the Treaties, and to follow the procedures, conditions and aims envisaged therein to assure fair co-operation between institutions. This is the fifth of a series of publications that over the last four years have investigated in depth the issue of fiscal federalism and administrative decentralisation: the first edition, reviewing the costs of not implementing federalism, was followed by another three publications dedicated to the issues of efficiency in the Public Administration, federalism as a driver for competitiveness and finally accountability as a founding principle of Delegated Law no. 42/2009 (act issued by the Government under Parliamentary delegation) on fiscal federalism pursuant to Article 119 of the Constitution. With this new publication, Unioncamere continues its survey on the actual implementation of financial and administrative decentralisation, and on the role of Regions and Local Bodies in the European decision-making process. The final aim is to set the foundations for a healthier management of public finances under the motto of “subsidiarity, participation and responsibility”. In Italy, today, the Public Administration accounts for more than 50% of public spending. However there are major differences amongst the regions: having just 48.7 civil servants every 1,000 inhabitants, the cost of the Public Administration in the Veneto is lower than in other regions, especially if compared to those in the South of Italy. The figures for tax evasion also show major differences between areas. In addition to the negative effects on the regional competitiveness, all of this is detrimental also to the fiscal residuum and the European cohesion policies. Reducing the heavy tax burden by using the income generated from fighting tax evasion and simplifying administrative procedures fosters the development of a favourable business environment, which is also the main aim of the Chambers of Commerce. This aim can only be achieved by creating greater cohesion to enhance subsidiarity, the role of autonomous regional/local institutions and decentralisation and, even more important, an efficient Public Administration. By publishing this paper, the Chambers of Commerce of the Veneto, which serve more than 500 thousand businesses, hope to provide a tool that might usefully contribute to the ongoing debate and support those who are working on the much needed reforms for our Country. Venice, June 2011 Giuseppe Fedalto President of Unioncamere del Veneto 2 Preface This Survey Report is the follow up publication of the work started in 2007 by our Observatory on federalism and public finance with the support of Unioncamere del Veneto. The results of research activities and information on discussion platforms devoted to federalism, fiscal policies and there roles of regional governments in which the Observatory participates at regional, national and also European level are made available on the web site www.osservatoriofederalismo.eu . Art. 117, comma five of the Italian Constitution and State Laws nos. 131 of 2003 and 11 of 2005 acknowledge the role of the Regions in the national decision-making process, both in drafting and subsequently executing national legislation. By enhancing the role of the Regional Parliament, this new national framework acknowledges broad options for the regional decision maker to actively participate in drafting Italian laws. By enhancing the importance of increasingly involving the Veneto Regional Council (elected legislative assembly) both in the bottom-up and the top-down law-making process in the European Union, it also bestows more responsibility and participation power on local institutions. Added to the reforms required by Italy to implement the so-called “asymmetric”, or “differentiated” federalism, this process is a great opportunity and a fundamental innovation for the Regions, as it offers new interesting prospects from an institutional and a financial standpoint. This process has the potential to cut the existing gap between the powers held by Ordinary Regions and the institutional framework of Autonomous Regions. “Differentiated federalism” would enable the Regions that want to, to manage further competences without damaging the principle of solidarity towards other Regions that will evidently continue to guarantee “traditionally” provided services. To enhance the role of regional and local authorities, it is essential to heed their needs and priorities and ensure an equal and full partnership between different government levels ( multi-level governance ). Against this backdrop, our participation in CALRE (Conference of European Regional Legislative Assemblies) facilitates a European-wide discussion on the remarkable unbalance in national and regional public finance systems in some Member States. This unbalance affects business competitiveness on the Single Market and is detrimental to the strict policy imposed by the European Union on Member States to limit public spending, as a result of the Greek crisis. To better understand the outreach of these issues, it is essential to have available more detailed information, including regional and local statistical data. To this end, the Council of the Veneto Region, which co-ordinates the Working Group on Financial Federalism, encouraged by the current Chairman of CARLE, has launched a project to collect data on financial flows generated by the Public Administration between intermediate levels of government for all regions participating in CALRE. The scope of the work is to provide a consistent picture and to constantly monitor sub-national financial flows that are currently not surveyed by official statistics. Clodovaldo Ruffato President of the Council of the Veneto Region 3 4 Preface The federalist reform and the subsidiarity principle will ensure a more efficient management of public spending: in turn this will limit waste and cut the tax burden on businesses and families. The reduction of public spending, associated to the implementation of fiscal federalism, will provide an opportunity to solve one of the main problems affecting Italy, namely tax evasion. Rigid public spending policies and a high fiscal burden have inevitably contributed to the increase of tax evasion and tax avoidance. How, therefore, should we proceed? An essential element in the fight against tax evasion is to enhance the role of the Regions and of Local