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Tax interactions among Belgian municipalities: Do interregional differences matter?

Author

Listed:
  • Marcel Gérard
  • Hubert Jayet

    (EQUIPPE - Economie Quantitative, Intégration, Politiques Publiques et Econométrie - Université de Lille, Sciences et Technologies - Université de Lille, Sciences Humaines et Sociales - PRES Université Lille Nord de France - Université de Lille, Droit et Santé)

  • Sonia Paty

    (EQUIPPE - Economie Quantitative, Intégration, Politiques Publiques et Econométrie - Université de Lille, Sciences et Technologies - Université de Lille, Sciences Humaines et Sociales - PRES Université Lille Nord de France - Université de Lille, Droit et Santé, CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper tests the existence of strategic interactions among municipalities, based on a panel of Belgian local tax rates from 1985 to 2004. A special emphasis is put on the role of the interregional differences in Belgium. Our results partly confirm previous findings for Belgium suggesting that municipalities interact over the local surcharge on the (labor) income tax rate but not on the local surcharge on the property tax. Using spatial econometrics tools and an original methodology for specifying weight matrices, we find that municipalities are sensitive to the local income tax rates set by only their closest neighbors. We cannot reject the hypothesis that interregional differences matter for municipalities belonging to the Brussels region: for the local income tax rate, the intensity of interactions is shown to be higher between municipalities belonging to the Brussels region than between municipalities belonging to different regions.

Suggested Citation

  • Marcel Gérard & Hubert Jayet & Sonia Paty, 2010. "Tax interactions among Belgian municipalities: Do interregional differences matter?," Post-Print halshs-00597389, HAL.
    • Handle: RePEc:hal:journl:halshs-00597389
    DOI: 10.1016/j.regsciurbeco.2010.03.010
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