The Dynamics Of A Policy Of Higher Local Property Taxation Applied By The Czech Local Governments: What Should Be Learned?

This paper presents the dynamics of an implementation of the policy of a higher local real estate coefficient as an innovation in the fiscal policy of local governments in post-communist Czechia. The punctuated equilibrium theory is applied in order to show the dynamics of diffusion of this fiscal innovation among 6,258 municipalities in the period 2009–2021. In order to get a more complex picture of local governments´ behaviour, dynamics are studied in a nexus of various approaches to fiscal federalism. In particular, the S-shaped curve and spatial analysis are employed within the analytical framework. The results suggest the policy of a higher local real estate coefficient is spreading out in municipalities known for a higher level of population and industry concentration where is a need for a high level of public services. Secondly, the policy is applied most frequently in populated areas and regions challenging structural challenges contributing to their depopulation. Thirdly, considering the election cycles, the local governments act on issues of a level of local taxation tactically. Finally, the spatial analysis revealed the approach of tactical changing of local taxes is rather concentrated in the north-western part of Czechia (i.e., in the underdeveloped region with obsolete economic structure). On the other hand, the spatial division of municipalities that surrounded the policy of higher local taxation is equal across the country. We also argue the impact of tax-mimicking behaviour may be less determinant than the previous studies suggested. On contrary, the factors like population density, depopulation, and substitution of the declining tax revenues seem to be more of determining factors for Czech municipalities.