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On the determinants of local tax rates: new evidence from Spain

  • Francisco J. Delgado


    (University of Oviedo)

  • Santiago Lago-Peñas


    (REDE, IEB and University of Vigo)

  • Matías Mayor


    (University of Oviedo)

This paper studies the determinants of local tax rates. For the two main local taxes in Spain - the property tax and the motor vehicle tax - we test the existence of tax mimicking, yardstick competition and political trends in a sample of 2,713 municipalities. Using different spatial models, the results support the hypothesis of tax mimicking, with coefficients over 0.40. We also show the relevance of political variables such as the ideology of the incumbents and political fragmentation. The fact that incumbents with weaker political support display stronger mimicking behaviour is interpreted as evidence in favour of yardstick competition. Finally, we find incumbents mimic neighbouring municipalities ruled by the same political party, confirming the political trends hypothesis.

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Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2011/4.

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Length: 39 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:ieb:wpaper:2011/3/doc2011-4
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