The Fiscal Capacity of the Italian Regions

This paper demonstrates the presence of significant territorial gaps in Italian subnational governments ability to generate revenue through local taxation. An exercise concerning three main local taxes shows that such fiscal gaps reflect primarily regional economies development, while differences in tax rates and tax evasion across the Country play a minor role. Within this framework, equalization causes substantial resources transfers in favour of those institutions with less fiscal resources endowment. In the second part of our paper we focus on such aspects, by describing the equalization mechanisms provided by some recent parliamentary bills that have recently become a hot topic in the Italian political debate and evaluating their potential distributive impact.