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Fiscal decentralization and tax collection: evidence from the rural property tax in Brazil

Thiago Caldeira, Philipp Ehrl and Tito Belchior Silva Moreira

European Journal of Political Economy, 2023, vol. 78, issue C

Abstract: The present paper investigates whether the decentralization of the rural land property tax (ITR) in Brazil increases the aggregate volume of tax collection from this source. We apply a difference-in-differences strategy where treatment is defined as the switch from a federal administration to the decentral management of the ITR by a municipality. The panel data from 2002 to 2017 show that decentralization leads to an average increase in overall ITR collection by about 42% in the first year, which rises to 109% in the 8th year. Our results are robust to balancing with entropy weights, the anticipation of treatment as well as the multi-period staggered timing of the ITR decentralization. Due to these peculiarities of our research design, we show that the increase in ITR collection is related to a more efficient tax management, i.e., a rigorous implementation and charge of tax duties.

Keywords: Fiscal federalism; Decentralization; Taxation; Impact evaluation (search for similar items in EconPapers)
JEL-codes: H2 H7 H77 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1016/j.ejpoleco.2023.102396

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