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Tax Competition Between Sub-Central Governments

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  • Hansjörg Blöchliger
  • José Maria Pinero Campos

Abstract

Sub-central tax competition is the strategic interaction of tax policy between jurisdictions with the objective to attract and retain mobile tax bases. The views on tax competition differ widely: while some consider that tax competition brings sub-central fiscal policy closer to citizen?s preferences, increases the efficiency of the public sector and avoids tax and spending excesses, others argue that tax competition leads to a distorted tax structure, to growing tax rate disparities and to an under-provision of public services. The main conclusions of the paper are: tax competition is stronger on mobile taxes (corporate and personal income tax) than on immobile taxes (property tax, consumption taxes); tax rates tend to be lower in wealthier jurisdictions; there is little evidence of a “race to the bottom” with respect to tax rates and tax revenues; and inter-jurisdictional differences in tax raising capacity – or economic wealth – appear to be lower in countries with more tax competition. Governments considering tax competition “excessive” may introduce or amend fiscal equalisation; increase sub-central property taxation and reduce other sub-central taxes; or harmonise the tax bases of sub-central governments to some extent. Concurrence fiscale entre administrations infranationales La concurrence fiscale entre administrations infranationales désigne l?utilisation stratégique de la politique fiscale dans le but d?attirer et de conserver les bases d?imposition mobiles. La concurrence fiscale suscite des avis partagés : certains considèrent qu?elle permet de rapprocher la politique budgétaire des administrations infranationales des attentes des citoyens, accroît l?efficience du secteur public et évite les excès en matière de prélèvements fiscaux et de dépenses, tandis que d?autres estiment qu?elle fausse la structure d?imposition, entraîne des disparités croissantes de taux d?imposition et pénalise l?offre de services publics. Les principales conclusions de ce document sont les suivantes : la concurrence fiscale est plus forte pour les bases d?imposition mobiles (impôt sur les bénéfices des sociétés et impôt sur le revenu des personnes physiques) que pour les bases immobiles (impôts fonciers, impôts sur la consommation) ; les taux d?imposition sont généralement inférieurs dans les juridictions plus riches ; il n?y a guère de signes de « nivellement par le bas » en matière de taux d?imposition et de recettes fiscales ; les différences en termes de capacités de recouvrement de l?impôt entre juridictions – ou richesse économique – sont moins marquées dans les pays où la concurrence fiscale est plus vive. Les pays qui jugent que la concurrence fiscale est « excessive » peuvent mettre en place un mécanisme de péréquation budgétaire ou, s?il existe déjà, en revoir les modalités ; alourdir la fiscalité immobilière et réduire d?autres impôts prélevés par les administrations infranationales ; ou procéder à une certaine harmonisation des bases d?imposition des administrations infranationales.

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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 872.

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Date of creation: 31 May 2011
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Handle: RePEc:oec:ecoaaa:872-en

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Keywords: tax competition; tax autonomy; sub-national tax policy; sub-central government; fiscal federalism; Concurrence fiscale; autonomie fiscale; administration infranationale; politique fiscale infranationale; fédéralisme budgétaire;

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