Maintaining taxes at the centre despite decentralization: interactions with national reforms
AbstractAlthough fiscal (de)centralization literature explains easily the centralization of taxes on the basis of a superior tax administration capacity, it finds more difficult to argue why in federal and decentralized systems subnational governments are ready to accept the demise of their taxing powers. This paper aims to contribute to the debate by analyzing the conditions under in which sub-national governments are willing to cede their taxing power to a central authority. A simple bargaining model is used to illustrate the choices available to both the central (federal) government and the sub-national governments (regions), where the main contribution lies in the introduction of the expenditure side of the budget and of its relevance for solving the commitment issue. We conclude that tax centralization will take place – transfers will prevail over sub-national taxes – if substantial efficiency gains from the centralized administration of taxes are expected. To support this conclusion, the paper presents evidence from decentralization processes in Argentina, Canada and Italy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by ICER - International Centre for Economic Research in its series ICER Working Papers with number 10-2011.
Length: 23 pages
Date of creation: Jun 2011
Date of revision:
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Howard Chernick & Jennifer Tennant, 2010. "Federal-State Tax Interactions in the United States and Canada," Publius: The Journal of Federalism, Oxford University Press, vol. 40(3), pages 508-533, Summer.
- Jean-Paul Faguet, 2004. "Why So Much Centralization? A Model of Primitive Centripetal Accumulation," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 43, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alessandra Calosso).
If references are entirely missing, you can add them using this form.