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Tax Mimicking in Local Business Taxation: Quasi-experimental Evidence from Portugal

Mariana Lopes da Fonseca

No 6647, CESifo Working Paper Series from CESifo Group Munich

Abstract: I exploit an exogenous reform introducing a local business tax in Portugal to study tax mimicking among jurisdictions. The identification strategy relies on a quasi-experimental difference-in-differences methodology and heterogeneity in treatment intensity. Results show evidence of significant short-run tax mimicking that decreases over time. I study possible generating processes underlying the strategic interaction among municipalities and find significant evidence of electoral concerns. These electoral concerns are not met with electoral consequences at the local elections, which may be behind the diffusion of local business taxation in the long run.

Keywords: tax mimicking; yardstick competition; local reform (search for similar items in EconPapers)
JEL-codes: D72 H71 H77 (search for similar items in EconPapers)
Date: 2017
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