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Tax assignment: does the practice match the theory?

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Author Info

  • Roy Bahl
  • Musharraf Cyan

Abstract

This paper builds on the existing literature to better explain the tax assignment choices made by countries in different economic circumstances. In particular, we explain why the degree of tax autonomy given to subnational governments is significantly greater in industrial than in developing countries, even when adjustment is made for differences in income level. We consider several arguments for this disparity. First, electoral regimes are not in place for the accountability gains to be fully captured. Second, tax decentralization may result in unacceptable fiscal disparities, and, third, tax administration costs are higher for subnational governments and there is not enough incentive to take steps to lower them. Finally, and contrary to expectations, we do not find empirical evidence that giving more discretionary powers to subnational governments in developing countries will lead to a crowding out of central revenues, but we do find this result for industrial countries.

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Bibliographic Info

Article provided by Pion Ltd, London in its journal Environment and Planning C: Government and Policy.

Volume (Year): 29 (2011)
Issue (Month): 2 (April)
Pages: 264-280

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Handle: RePEc:pio:envirc:v:29:y:2011:i:2:p:264-280

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Web page: http://www.pion.co.uk

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Cited by:
  1. Gustavo Canavire-Bacarreza & Jorge Martínez-Vázquez & Cristián Sepúlveda, 2012. "Sub-national Revenue Mobilization in Peru," IDB Publications 65358, Inter-American Development Bank.
  2. Brian Dollery & Michael Kortt & Bligh Grant, 2012. "Options for Rationalizing Local Government Structure: A Policy Agenda," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1207, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

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