(provinces and municipalities), which also depend on shared taxes, as well as a host of local
fees and duties. Arguably, although it is still evolving, the Spanish system has given rise to a
complex tax system, which achieves greater autonomy at the expense of less transparency.

Which Taxes should be Devolved?

Earlier, we highlighted the main principles which should guide fiscal devolution: ie that
devolved taxes should not have a redistributive function; that they should pay some regard to
the problem of factor mobility; and that tax exportation should be avoided. As might be
expected, most OECD countries that have opted for a substantial degree of fiscal autonomy
have tended to allow sub-central governments greater control over benefit taxes or user
charges (mainly taxes or fees/charges for local services) and property taxes, with limited
control on taxes on more mobile factors (income and profit taxation) but almost no control
over the taxation of the extraction of natural resources (royalties or profit taxation). The only
exceptions are the USA and Canada, which traditionally allowed states some discretion to set
natural resource taxes. Resource-rich countries in the EU have not devolved taxes on natural
resources.

Whilst some countries have devolved business taxes (Austria, Belgium, Germany, Italy,
Spain, and Switzerland), these do not constitute a substantial share of regional/local revenues.
These are countries where sub-central governments actually control local business tax rates or
the tax base, i.e. they do not simply share in national corporate taxation revenues. Should the
UK seek to grant more fiscal autonomy to its devolved authorities or to the English regions, it
is unlikely that corporate taxation would be a serious candidate, given the mobility of capital.

¹² ACs receive a block grant of 15% of the income tax collected in the region, except where expenditures
financed by the personal income tax revenues are lower than the amount of revenue that would be received. In
these cases the share falls to 5-10%. Some have the right to modify rates of tax and change tax credits.

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