Does fiscal cooperation increase local tax rates ?

Sylvie Charlot, Sonia Paty and Virginie Piguet

No 2010/1, INRA UMR CESAER Working Papers from INRA UMR CESAER, Centre d'’Economie et Sociologie appliquées à l'’Agriculture et aux Espaces Ruraux

Abstract: The main purpose of this paper is to assess the effects of fiscal cooperation on local taxation in a decentralized country, using the French experience. We estimate a model of tax setting for local business tax using spatial and dynamic econometric techniques, for the period 1993-2003. We find first that reducing the number of municipalities is likely to limit tax competition and increase local business tax rates as a consequence. Second, we find that tax rates are higher when groups of localities set a single business tax rate rather than applying an additional rate of business tax, suggesting that horizontal tax competition constrains the level of tax rate increase generated by tax-base sharing.

Keywords: Consolidation; Tax competition; Vertical externalities; Local business tax (search for similar items in EconPapers)
JEL-codes: H2 H3 H7 (search for similar items in EconPapers)
Pages: 25
Date: 2010-01-15
New Economics Papers: this item is included in nep-acc, nep-geo, nep-pbe, nep-pub and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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