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Tax assignment: does the practice match the theory?

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  • Roy Bahl
  • Musharraf Cyan

Abstract

This paper builds on the existing literature to better explain the tax assignment choices made by countries in different economic circumstances. In particular, we explain why the degree of tax autonomy given to subnational governments is significantly greater in industrial than in developing countries, even when adjustment is made for differences in income level. We consider several arguments for this disparity. First, electoral regimes are not in place for the accountability gains to be fully captured. Second, tax decentralization may result in unacceptable fiscal disparities, and, third, tax administration costs are higher for subnational governments and there is not enough incentive to take steps to lower them. Finally, and contrary to expectations, we do not find empirical evidence that giving more discretionary powers to subnational governments in developing countries will lead to a crowding out of central revenues, but we do find this result for industrial countries.

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  • Roy Bahl & Musharraf Cyan, 2011. "Tax assignment: does the practice match the theory?," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 29(2), pages 264-280, April.
  • Handle: RePEc:pio:envirc:v:29:y:2011:i:2:p:264-280
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    Cited by:

    1. Matteo Bobba & Jérémie Gignoux, 2011. "Policy-induced Social Interactions and Schooling Decisions," PSE - G-MOND WORKING PAPERS halshs-00962478, HAL.
    2. Brian Dollery & Michael Kortt & Bligh Grant, 2013. "Options for rationalizing local government structure: a policy agenda," Chapters,in: The Challenge of Local Government Size, chapter 10, pages 242-262 Edward Elgar Publishing.
    3. Daniel Artana & Sebastián Auguste & Marcela Cristini & Cynthia Moskovits & Ivana Templado, 2012. "Sub-National Revenue Mobilization in Latin American and Caribbean Countries: The Case of Argentina," IDB Publications (Working Papers) 3887, Inter-American Development Bank.
    4. Gustavo Canavire-Bacarreza & Jorge Martinez-Vazquez & Cristian Sepúlveda, 2012. "Sub-national Revenue Mobilization in Peru," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1209, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    5. Miral, Romulo Jr. E.M., 2017. "Federalism: Prospects for the Philippines," Discussion Papers DP 2017-29, Philippine Institute for Development Studies.

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