The growth and variability of regional taxes: an application to Italy

The growth and variability of regional taxes: an application to Italy. Regional Studies. This paper investigates the potential long-term growth and short-term cyclical stability of the Italian regional tax system. Short- and long-run elasticities with respect to regional gross domestic product (GDP) are estimated between 2001 and 2012 for the surtax on central personal income tax (RPIT) and for the regional tax on productive activities (RTPA). Cyclical reactions are more marked for the RTPA and higher in the southern regions. Significant long-run growth of the RPIT and RTPA, on the other hand, is found only in the northern regions. The results suggest that the behaviour of regional taxes may increase the Italian north–south gap and cast some doubt on these taxes in financing essential public services, such as health, in each region.