This content is from: Local Insights

Italy

The Italian Constitution has recently been amended by constitutional law No 3, October 18 2001, in line with the general trend towards federalism.

The Italian Constitution now grants ordinary regions exclusive powers on all matters which are not expressly the preserve of the central government. This significantly increases the powers of ordinary regions, which prior to the enactment of the recent reform enjoyed only those powers specifically granted to them. The law means that:

  • ordinary regions now have financial autonomy in connection with the expenditure of their resources and the determination of their revenues;
  • the regions are entitled to establish and collect their own taxes and other revenues in harmony with the general criteria of the Constitution and in compliance with the principles of coordination of public debt and the domestic tax system;
  • the regions are entitled to receive the portion of central government taxes collected within their territory;
  • the redistribution of resources from richer areas to poorer areas should be made through an equalization fund;
  • the resources listed in the preceding paragraphs allow the integral funding of the public functions attributed to regions;
  • to promote economic development, cohesion and economic and social balance, the central government provides additional resources and makes specific interventions in support of specific regions; and
  • the regions may incur indebtedness only to finance investment expenses, and such indebtedness may not be guaranteed by the central government.

Major changes have also been introduced by additional legislation, which changes the criteria for the funding of healthcare expenditures that have for many years been supported by the central government. Regions are now required to offer minimum levels of healthcare services, which is defined as equaling the level of healthcare expenditure made by the region in the preceding year.

Until the introduction of the new system certain funds had a restricted uses. At least 90% of local impost (imposta regionale sulle attività produttive, IRAP) collected by regions was to be earmarked for healthcare services.

Under the new regime, IRAP funds are no longer restricted and regions are given greater flexibility to use their revenues for various expenditures, including healthcare services, thereby improving the regions' cash flows. The only limit is that, in any year, a region should spend an amount on healthcare equal to the amount spent in the preceding year. If a region is able to manage its healthcare services better it will no longer be compelled to devote 90% of the IRAP to such expenditures. The aim is to improve the level of the healthcare services in part through outsourcing so as to reduce costs. Should regions not have sufficient revenues to cover healthcare expenditures they are enabled to increase revenues by raising local taxes.

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