Revenue Equalization Systems in a Federation with Tax Evasion
We analyze how vertical or horizontal fiscal equalization affects the overprovision of local public goods due to vertical fiscal externality, when there is tax evasion. The overspending incentive of regional governments is examined in the cases of fiscal equalization based on pretax earned income and on reported taxable income. We show that a more efficient level of regional public expenditure is associated with a vertical equalization scheme based on a proxy of earned income taken from national-accounts data.
Volume (Year): 68 (2012)
Issue (Month): 3 (September)
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References listed on IDEAS
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- Boadway, Robin & Tremblay, Jean-François, 2010. "Mobility and Fiscal Imbalance," National Tax Journal, National Tax Association, vol. 63(4), pages 1023-1053, December.
- Robin Boadway, 2004.
"The Theory and Practice of Equalization,"
CESifo Economic Studies,
CESifo, vol. 50(1), pages 211-254.
- Robin Boadway, 2003. "The Theory and Practice of Equalization," Working Papers 1016, Queen's University, Department of Economics.
- Baretti, Christian & Huber, Bernd & Lichtblau, Karl, 2002. "A Tax on Tax Revenue: The Incentive Effects of Equalizing Transfers: Evidence from Germany," Munich Reprints in Economics 20129, University of Munich, Department of Economics.
- Christian Baretti & Bernd Huber & Karl Lichtblau, 2002. "A Tax on Tax Revenue: The Incentive Effects of Equalizing Transfers: Evidence from Germany," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(6), pages 631-649, November. Full references (including those not matched with items on IDEAS)
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