Does fiscal cooperation increase local tax rates ?
AbstractThe main purpose of this paper is to assess the effects of fiscal cooperation on local taxation in a decentralized country, using the French experience. We estimate a model of tax setting for local business tax using spatial and dynamic econometric techniques, for the period 1993-2003. We find first that reducing the number of municipalities is likely to limit tax competition and increase local business tax rates as a consequence. Second, we find that tax rates are higher when groups of localities set a single business tax rate rather than applying an additional rate of business tax, suggesting that horizontal tax competition constrains the level of tax rate increase generated by tax-base sharing.
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Bibliographic InfoPaper provided by INRA UMR CESAER, Centre d’Economie et Sociologie appliquées à l’Agriculture et aux Espaces Ruraux in its series INRA UMR CESAER Working Papers with number 2010/1.
Date of creation: 15 Jan 2010
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Consolidation; Tax competition; Vertical externalities; Local business tax;
Find related papers by JEL classification:
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
- H7 - Public Economics - - State and Local Government; Intergovernmental Relations
This paper has been announced in the following NEP Reports:
- NEP-ACC-2010-08-28 (Accounting & Auditing)
- NEP-ALL-2010-08-28 (All new papers)
- NEP-GEO-2010-08-28 (Economic Geography)
- NEP-PBE-2010-08-28 (Public Economics)
- NEP-PUB-2010-08-28 (Public Finance)
- NEP-URE-2010-08-28 (Urban & Real Estate Economics)
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