BUDGETARY FEDERALISM municipalities are not allowed to levy taxes not included in these lists, unless other acts expressly offer a base for this. By bye-Law and within the boundaries of the aw, the provincal and municipal councils, who are also the provincal and municipa budgetary authorities, determine the chargeable event, the taxable amount, and th tax rate. One condition is, that rates may not be made subject to the taxpayer Income, wealth or profit In 2002, 37% of the municipal revenue will be made up by municipal fund payments, and 46% by all kinds of specific payments. It should be noted, that the share of the general payments has gradually increased since 1986. Duties and taxes make up the remaining 17%. At a provincial level, the percentages amount to 35 Provinces Fund), 38(specific payments)and 27(duties and taxes), respectively The share of the general payments from the Provinces Fund has shown an increase as well, at the expense of the specif ic payments. The share of provincial taxes has also gone up considerably. 15 Provinces and municipalities send their decisions regarding the contracting of ans,the lending of money and the issuing of guarantees to the supervising Minister and to Gedeputeerde Staten, respectively 6 Obligatory approval as it used to exist, has expired; consequently, financial freedom of the sub-national authorities has increased in this area as well. Financal crashes, both at a provincia land a municipal level, have raised the question whether this freedom may have been granted too easily. Consequently, recent proposals modify ing the Municipality Act include various measures to improve financal supervision, for example by establishing local audit offices 17 The Netherlands within the European Com 4.1 The budget ofthe European Community On the European levelan annual budget is laid down, which has to include all items of revenueand expenditure of the European Community. Administrative expenditure ccasioned for the Community institutions by the provisions of the Treaty on European Union will also be charged to this budget. This concerns expenditure executed by these institutions to facilitate the common foreign and security policy of the 15 Mem ber States (the so-called second European pillar) and to facilitate cooperation in the fields of justice and home affairs(the third pillar). Policy expenditure for the implementation of this Treaty is only partly charged to the European budget. The other part is financed on the basis of a distribution code and is Annexes to the budgets of the Provinces Fund and the Municipalities Fund for the year 2002, parliamentary documents 28000, chapters B and C, nos. 2. The Financing ofLocal Author ities Act provides further details. 17 In 1999, the provnce of Zuid-Holland reached an admnistrative cris when Cetec,a ompamy to which the prov ince had lent a cons derable amount of money, went bankrupt. The municipality of Rotterdam was for a kong tme faced with former burgomasters and aldermen s behavior regarding the claiming of expenses.BUDGETARY FEDERALISM 9 municipalities are not allowed to levy taxes not included in these lists, unless other acts expressly offer a base for this. By bye-law and within the boundaries of the law, the provincial and municipal councils, who are also the provincial and municipal budgetary authorities, determine the chargeable event, the taxable amount, and the tax rate. One condition is, that rates may not be made subject to the taxpayer s income, wealth or profit. In 2002, 37% of the municipal revenue will be made up by municipal fund payments, and 46% by all kinds of specific payments. It should be noted, that the share of the general payments has gradually increased since 1986. Duties and taxes make up the remaining 17%. At a provincial level, the percentages amount to 35 (Provinces Fund), 38 (specific payments) and 27 (duties and taxes), respectively. The share of the general payments from the Provinces Fund has shown an increase as well, at the expense of the specific payments. The share of provincial taxes has also gone up considerably.15 Provinces and municipalities send their decisions regarding the contracting of loans, the lending of money and the issuing of guarantees to the supervising Minister and to Gedeputeerde Staten, respectively.16 Obligatory approval as it used to exist, has expired; consequently, financial freedom of the sub-national authorities has increased in this area as well. Financial crashes, both at a provincia l and a municipal level, have raised the question whether this freedom may have been granted too easily. Consequently, recent proposals modifying the Municipality Act include various measures to improve financial supervision, for example by establishing local audit offices.17 4 The Netherlands within the European Community 4.1 The budget of the European Community On the European level an annual budget is laid down, which has to include all items of revenue and expenditure of the European Community. Administrative expenditure occasioned for the Community institutions by the provisions of the Treaty on European Union will also be charged to this budget. This concerns expenditure executed by these institutions to facilitate the common foreign and security policy of the 15 Member States (the so-called second European pillar) and to facilitate cooperation in the fields of justice and home affairs (the third pillar). Policy expenditure for the implementation of this Treaty is only partly charged to the European budget. The other part is financed on the basis of a distribution code and is 15. Annexes to the budgets of the Provinces Fund and the Municipalities Fund for the year 2002, parliamentary documents 28000, chapters B and C, nos. 2. 16. The Financing of Local Authorities Act provides further details. 17. In 1999, the province of Zuid-Holland reached an administrative crisis when Ceteco, a company to which the province had lent a considerable amount of money, went bankrupt. The municipality of Rotterdam was for a long time faced with former burgomasters and aldermen s behavior regarding the claiming of expenses