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Tax interaction dynamics among Belgian municipalities 1984-1997

Author

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  • RICHARD, Jean-François
  • TULKENS, Henry
  • VERDONCK, Magali

Abstract

The purpose of this paper is to test econometrically the existence of fiscal interactions between Belgian municipalities. At the time of writing, the motivation was to provide scientific support to the lively debate on fiscal competition that took place among Belgian politicians in the late nineties. Two types of taxes are considered, for which Belgian municipalities have the decision power as to rates : the “centimes additionnels” on the personal income tax and the “précompte immobilier” which is a property tax. A dynamic adjustment model is specified and estimated using panel data for 598 municipalities over 15 years. The empirical results obtained bear upon two main points : (i) Some interaction definitely has prevailed between the municipalities’ fiscal choices made during the observation period, for both taxes; (ii) However, the adjustment reactions to the other municipalities’ fiscal choices have occured over time at the very low yearly pace of 6% and 10% respectively, of the discrepancy between the actual rates and the preferred rates.
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Suggested Citation

  • RICHARD, Jean-François & TULKENS, Henry & VERDONCK, Magali, 2006. "Tax interaction dynamics among Belgian municipalities 1984-1997," LIDAM Reprints CORE 1953, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:1953
    Note: In : P. Chander, J. Drèze, K. Lovell and J. Mintz (eds.), Public Goods, Environmental Externalities and Fiscal Competition. New York, Springer, 533-556. 2006
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    2. Geys Benny & Revelli Federico, 2009. "Decentralization, competition and the local tax mix: Evidence from Flanders," Department of Economics and Statistics Cognetti de Martiis. Working Papers 200902, University of Turin.
    3. Cláudio Burian Wanderley, 2010. "Evolução Da Arrecadação Tributária Municipal Em Minas Gerais No Início Do Novo Milênio," Anais do XIV Semin·rio sobre a Economia Mineira [Proceedings of the 14th Seminar on the Economy of Minas Gerais], in: Anais do XIV Seminário sobre a Economia Mineira [Proceedings of the 14th Seminar on the Economy of Minas Gerais], Cedeplar, Universidade Federal de Minas Gerais.

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