Federalism and Local Tax Powers: Evolution and Challenges

Abstract

All federalism supposes decentralization of power in the territory, which must be accompanied by attributions of each level of government with autonomy, together with the essential economic and financial resources. The constitutional text of 1853/60 is structured on the basis of two levels of government, with the provinces delegating powers to the Nation, establishing in tax matters, the separation of sources with different treasures, formed with taxes of each one. The evolution of successive economic crises leads to a gradual transformation towards a competition system that in practice, produces considerable national centralization. The constitutional reform of 1994 laid the foundations for the issuance of a tax co-participation norm, whose birth would be sustained in the agreements between the two referred National and Provincial levels, plus the City of Buenos Aires, due to its autonomous government regime. Since the constitutional deadlines for its issuance have not been met, laws and consensuses have been following one another, seeking to harmonize the exercise of competence of the different entities, but failing to specify the co-participation regulations. However, on the contrary, the role of the Nation as the main executor of the policy fiscal has been reinforced. Therefore, it is worth reinforcing the need to reach agreements that involve, on the one hand, the commitment to strictly comply with the prohibition of unilateral modifications and, on the other, the local commitment to improve control of public spending, fiscal responsibility, transparency and good governance.