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On the determinants of local tax rates: new evidence from Spain

Francisco Delgado (), Santiago Lago-Peñas and Matías Mayor ()

No 2011/4, Working Papers from Institut d'Economia de Barcelona (IEB)

Abstract: This paper studies the determinants of local tax rates. For the two main local taxes in Spain - the property tax and the motor vehicle tax - we test the existence of tax mimicking, yardstick competition and political trends in a sample of 2,713 municipalities. Using different spatial models, the results support the hypothesis of tax mimicking, with coefficients over 0.40. We also show the relevance of political variables such as the ideology of the incumbents and political fragmentation. The fact that incumbents with weaker political support display stronger mimicking behaviour is interpreted as evidence in favour of yardstick competition. Finally, we find incumbents mimic neighbouring municipalities ruled by the same political party, confirming the political trends hypothesis.

Keywords: Local taxation; tax mimicking; yardstick competition; political trends (search for similar items in EconPapers)
JEL-codes: C31 H71 H77 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Journal Article: ON THE DETERMINANTS OF LOCAL TAX RATES: NEW EVIDENCE FROM SPAIN (2015) Downloads
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