IDEAS home Printed from https://ideas.repec.org/a/esj/esriea/188b.html
   My bibliography  Save this article

Estimating the Effect of Local Allocation Tax Grants on Local Tax Collection Rates:Verifying the Effect of the Administrative Reform Incentive Assessment and the Distortion Underlying Local Allocation Tax Grants (in Japanese)

Author

Listed:
  • Mitsunari ISHIDA

Abstract

As part of the Trinity Reform, the Japanese Ministry of Internal Affairs and Communication (MIC) established the Administrative Reform Incentive Assessment (ARIA) program under the local allocation tax (LAT) system during the fiscal year of 2005. This program was aimed at motivating local governments with LAT grants to raise their tax collection rates (TCRs), since a number of economists had asserted that LAT grants eroded the fiscal discipline of local governments. Our paper uses empirical methods to estimate the effect of the ARIA program and of the distortion underlying LAT grants on the fixed asset tax for land. The major results are follows. First, the ARIA does not stimulate local governments to improve their TCRs with respect to the fixed asset tax. It seems that the amount of the ARIA is insufficient to improve their TCRs, and, furthermore, that the ARIA is not widely appreciated by local governments. Second, the TCRs of local governments with LAT grants were 0.16%~0.18% higher than the TCRs of those that did not. This result implies that local governments with the grants have excessive incentives to collect taxes because the LAT system compensates these authorities for a portion of shrinking their tax base.

Suggested Citation

  • Mitsunari ISHIDA, 2014. "Estimating the Effect of Local Allocation Tax Grants on Local Tax Collection Rates:Verifying the Effect of the Administrative Reform Incentive Assessment and the Distortion Underlying Local Allocation," Economic Analysis, Economic and Social Research Institute (ESRI), vol. 188, pages 24-42, March.
  • Handle: RePEc:esj:esriea:188b
    as

    Download full text from publisher

    File URL: http://www.esri.go.jp/jp/archive/bun/bun188/bun188b.pdf
    Download Restriction: no

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:esj:esriea:188b. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (KAWAMOTO Takuma). General contact details of provider: http://edirc.repec.org/data/esrgvjp.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.