IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Tax Competition Between Sub-Central Governments

  • Hansjörg Blöchliger
  • José Maria Pinero Campos

Sub-central tax competition is the strategic interaction of tax policy between jurisdictions with the objective to attract and retain mobile tax bases. The views on tax competition differ widely: while some consider that tax competition brings sub-central fiscal policy closer to citizen?s preferences, increases the efficiency of the public sector and avoids tax and spending excesses, others argue that tax competition leads to a distorted tax structure, to growing tax rate disparities and to an under-provision of public services. The main conclusions of the paper are: tax competition is stronger on mobile taxes (corporate and personal income tax) than on immobile taxes (property tax, consumption taxes); tax rates tend to be lower in wealthier jurisdictions; there is little evidence of a “race to the bottom” with respect to tax rates and tax revenues; and inter-jurisdictional differences in tax raising capacity – or economic wealth – appear to be lower in countries with more tax competition. Governments considering tax competition “excessive” may introduce or amend fiscal equalisation; increase sub-central property taxation and reduce other sub-central taxes; or harmonise the tax bases of sub-central governments to some extent. Concurrence fiscale entre administrations infranationales La concurrence fiscale entre administrations infranationales désigne l?utilisation stratégique de la politique fiscale dans le but d?attirer et de conserver les bases d?imposition mobiles. La concurrence fiscale suscite des avis partagés : certains considèrent qu?elle permet de rapprocher la politique budgétaire des administrations infranationales des attentes des citoyens, accroît l?efficience du secteur public et évite les excès en matière de prélèvements fiscaux et de dépenses, tandis que d?autres estiment qu?elle fausse la structure d?imposition, entraîne des disparités croissantes de taux d?imposition et pénalise l?offre de services publics. Les principales conclusions de ce document sont les suivantes : la concurrence fiscale est plus forte pour les bases d?imposition mobiles (impôt sur les bénéfices des sociétés et impôt sur le revenu des personnes physiques) que pour les bases immobiles (impôts fonciers, impôts sur la consommation) ; les taux d?imposition sont généralement inférieurs dans les juridictions plus riches ; il n?y a guère de signes de « nivellement par le bas » en matière de taux d?imposition et de recettes fiscales ; les différences en termes de capacités de recouvrement de l?impôt entre juridictions – ou richesse économique – sont moins marquées dans les pays où la concurrence fiscale est plus vive. Les pays qui jugent que la concurrence fiscale est « excessive » peuvent mettre en place un mécanisme de péréquation budgétaire ou, s?il existe déjà, en revoir les modalités ; alourdir la fiscalité immobilière et réduire d?autres impôts prélevés par les administrations infranationales ; ou procéder à une certaine harmonisation des bases d?imposition des administrations infranationales.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Our checks indicate that this address may not be valid because: 403 Forbidden ( [303 See Other]--> If this is indeed the case, please notify ()

Download Restriction: no

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 872.

in new window

Date of creation: 31 May 2011
Date of revision:
Handle: RePEc:oec:ecoaaa:872-en
Contact details of provider: Postal: 2 rue Andre Pascal, 75775 Paris Cedex 16
Phone: 33-(0)-1-45 24 82 00
Fax: 33-(0)-1-45 24 85 00
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Yvon Rocaboy & Jean-Michel Josselin & Lars P. Feld, 2002. "Le mimétisme fiscal : une application aux Régions françaises," Économie et Prévision, Programme National Persée, vol. 156(5), pages 43-49.
  2. Edmark, Karin & Ågren, Hanna, 2008. "Identifying strategic interactions in Swedish local income tax policies," Journal of Urban Economics, Elsevier, vol. 63(3), pages 849-857, May.
  3. Salvador Barrios & Harry Huizinga & Luc Laeven & Gaëtan Nicodème, 2008. "International Taxation and Multinational Firm Location Decisions," Working Papers 0825, Oxford University Centre for Business Taxation.
  4. Sebastian Hauptmeier & Ferdinand Mittermaier & Johannes Rincke, 2008. "Fiscal Competition over Taxes and Public Inputs: Theory and Evidence," CESifo Working Paper Series 2499, CESifo Group Munich.
  5. Lars P. Feld & Gebhard Kirchgässner & Christoph A. Schaltegger, 2003. "Decentralized Taxation and the Size of Government: Evidence from Swiss State and Local Governments," CESifo Working Paper Series 1087, CESifo Group Munich.
  6. Robin Boadway, 2003. "The Theory and Practice of Equalization," Working Papers 1016, Queen's University, Department of Economics.
  7. Rachel Griffith & Alexander Klemm, 2004. "What has been the tax competition experience of the past 20 years?," IFS Working Papers W04/05, Institute for Fiscal Studies.
  8. Aleksandra Riedl & Silvia Rocha-Akis, 2008. "Testing the tax competition theory: How elastic are national tax bases in Western Europe?," Working Papers 142, Oesterreichische Nationalbank (Austrian Central Bank).
  9. Hoyt, William H., 1992. "Market power of large cities and policy differences in metropolitan areas," Regional Science and Urban Economics, Elsevier, vol. 22(4), pages 539-558, November.
  10. Thiess Buettner, 2001. "Local Business Taxation and Competition for Capital: The Choice of the Tax Rate," CESifo Working Paper Series 440, CESifo Group Munich.
  11. Åsa Johansson & Chistopher Heady & Jens Arnold & Bert Brys & Laura Vartia, 2008. "Taxation and Economic Growth," OECD Economics Department Working Papers 620, OECD Publishing.
  12. Devereux, M.P. & Lockwood, B. & Redoano, M., 2007. "Horizontal and vertical indirect tax competition: Theory and some evidence from the USA," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 451-479, April.
  13. Becker, Sascha & Egger, Peter H & Merlo, Valeria, 2008. "How Low Business Tax Rates Attract Multinational Headquarters: Municipality-Level Evidence from Germany," Stirling Economics Discussion Papers 2008-30, University of Stirling, Division of Economics.
  14. Federico Revelli, 2001. "Spatial patterns in local taxation: tax mimicking or error mimicking?," Applied Economics, Taylor & Francis Journals, vol. 33(9), pages 1101-1107.
  15. Craig Brett & Joris Pinkse, 2000. "The determinants of municipal tax rates in British Columbia," Canadian Journal of Economics, Canadian Economics Association, vol. 33(3), pages 695-714, August.
  16. Bordignon, Massimo & Cerniglia, Floriana & Revelli, Federico, 2003. "In search of yardstick competition: a spatial analysis of Italian municipality property tax setting," Journal of Urban Economics, Elsevier, vol. 54(2), pages 199-217, September.
  17. Dhammika Dharmapala & James R. Hines Jr., 2006. "Which Countries Become Tax Havens?," NBER Working Papers 12802, National Bureau of Economic Research, Inc.
  18. Thomas Laubach, 2005. "Fiscal Relations Across Levels of Government in the United States," OECD Economics Department Working Papers 462, OECD Publishing.
  19. Schaltegger, Christoph A & Kuttel, Dominique, 2002. " Exit, Voice, and Mimicking Behavior: Evidence from Swiss Cantons," Public Choice, Springer, vol. 113(1-2), pages 1-23, October.
  20. Richard Baldwin; Paul Krugman, 2001. "Agglomeration, Integration and Tax Harmonization," IHEID Working Papers 01-2001, Economics Section, The Graduate Institute of International Studies.
  21. Koethenbuerger, Marko, 2011. "How do local governments decide on public policy in fiscal federalism? Tax vs. expenditure optimization," Journal of Public Economics, Elsevier, vol. 95(11), pages 1516-1522.
  22. Agnès Bénassy-Quéré & Nicolas Gobalraja & Alain Trannoy, 2007. "Tax and public input competition," Economic Policy, CEPR;CES;MSH, vol. 22, pages 385-430, 04.
  23. Braid, Ralph M, 1996. "Symmetric Tax Competition with Multiple Jurisdictions in Each Metropolitan Area," American Economic Review, American Economic Association, vol. 86(5), pages 1279-90, December.
  24. Fredrik Carlsen & Bjørg Langset & Jørn Rattsø, 2005. "The relationship between firm mobility and tax level: Empirical evidence of fiscal competition between local governments," Discussion Papers 424, Statistics Norway, Research Department.
  25. Albert Solé Ollé & Elisabet Viladecans Marsal, 2003. "Fiscal and growth spillovers in large urban areas," Working Papers 2003/1, Institut d'Economia de Barcelona (IEB).
  26. Liebig, Thomas & Puhani, Patrick A. & Sousa-Poza, Alfonso, 2006. "Taxation And Internal Migration - Evidence From The Swiss Census Using Community-Level Variation In Income Tax Rates," Hannover Economic Papers (HEP) dp-348, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  27. Hansjörg Blöchliger & Oliver Petzold, 2009. "Taxes or Grants: What Revenue Source for Sub-Central Governments?," OECD Economics Department Working Papers 706, OECD Publishing.
  28. Masayoshi Hayashi & Robin Boadway, 2001. "An empirical analysis of intergovernmental tax interaction: the case of business income taxes in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 34(2), pages 481-503, May.
  29. Christian A. L. Hilber & Christopher J. Mayer, . "Land Supply, House Price Capitalization, and Local Spending on Schools," Zell/Lurie Center Working Papers 392, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
  30. Fredriksson, Per G. & List, John A. & Millimet, Daniel L., 2004. "Chasing the smokestack: strategic policymaking with multiple instruments," Regional Science and Urban Economics, Elsevier, vol. 34(4), pages 387-410, July.
  31. Wilson, John Douglas & Wildasin, David E., 2004. "Capital tax competition: bane or boon," Journal of Public Economics, Elsevier, vol. 88(6), pages 1065-1091, June.
  32. Damiaan Persyn & Koen Algoed, 2009. "Interregional redistribution, growth and convergence," Vives discussion paper series 4, Katholieke Universiteit Leuven, Faculteit Economie en Bedrijfswetenschappen, Vives.
  33. Kessler, Anke & Lessmann, Christian, 2010. "Interregional Redistribution and Regional Disparities: How Equalization Does (Not) Work," CEPR Discussion Papers 8133, C.E.P.R. Discussion Papers.
  34. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
  35. Kelly D. Edmiston & F. Javier Arze del Granado, 2006. "Economic Effects of Apportionment Formula Changes," Public Finance Review, , vol. 34(5), pages 483-504, September.
  36. Jordi Jofre-Monseny & Albert Solé-Ollé, 2008. "Which Communities should be afraid of Mobility? The Effects of Agglomeration Economies on the Sensitivity of Firm Location to Local Taxes," CESifo Working Paper Series 2311, CESifo Group Munich.
  37. Luthi, Eva & Schmidheiny, Kurt, 2011. "The Effect of Agglomeration Size on Local Taxes," CEPR Discussion Papers 8344, C.E.P.R. Discussion Papers.
  38. Bev Dahlby & Neil Warren, 2003. "Fiscal Incentive Effects of the Australian Equalisation System," The Economic Record, The Economic Society of Australia, vol. 79(247), pages 434-445, December.
  39. Jørn Rattsø & Jon Hernes Fiva, 2004. "Welfare Competition in Norway," Working Paper Series 4204, Department of Economics, Norwegian University of Science and Technology.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:oec:ecoaaa:872-en. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.