tax competition
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2021 ◽  
Vol 20 (4) ◽  
pp. 797-812
Author(s):  
Jakub Karnowski ◽  
Andrzej Rzońca

Motivation: The best way to widen access to public services at the local level is to increase efficiency of local government spending. However, an increase in efficiency may refer to output or inputs. In the latter case it does not widen access to public services. Moreover, factors conducive to spending efficiency may be detrimental to local cohesion. Finding a way so that the financing framework for local governments would reconcile the efficiency condition with the conditions of access to public services and local cohesion respectively, is an issue of great importance for economic policy. It seems to be so especially in a country like Poland, where there are large differences in the level of development between regions for historical reasons. These differences, if left accumulating, could easily jeopardize efficiency due to distorted capital flows, not to mention political tensions they may cause. Aim: The article aims at identifying basic features of the financing framework for local governments in Poland that hinder efficiency of their spending and at proposing feasible changes to that framework that would improve the efficiency but not at the expense of local cohesion or access to public services. Results: The article argues that the financing framework of local governments in Poland would better meet conditions of both efficiency and access to public services, if local governments relied mostly on revenues from income taxes instead of transfers from the central government, and some elements of tax competition between local authorities, although restricted to PIT-free allowance, were introduced. Such a shift in local governments revenue composition would not weaken local cohesion, if it was accompanied by an appropriate solidarity subvention financed by the richest voivodeship and the central government, and non-recurring central government revenues were allocated to investments exceeding financial capacity of local governments.


2021 ◽  
Vol 12 (2) ◽  
pp. 314-331
Author(s):  
Pie Habimana

Tax competition is a topic that is often discussed in the forums of international tax lawyers. Not only lawyers but also economists, politicians, and other scientists discuss tax competition topics. One of the elements that characterize such discussions is the polarity of the key aspects of tax competition. Such polarities are the focus of this article, which pulls together disparate discussions on tax competition polarities. This article adds to the existing knowledge some key elements to consider while studying this field. In that context, this article claims that the study of tax competition should not be done in a one-way approach, rather in a two-way approach.


2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Raffaele Miniaci ◽  
Paolo M. Panteghini ◽  
Giulia Rivolta

Abstract Most of the empirical literature on tax competition has been using panel models in which each country’s tax rate responds to a weighted average of other countries’ tax rates, where weights are given. This approach imposes the reaction functions to be such that all tax rates are either strategic complements or strategic substitutes for all the countries. Moreover, it also requires that the intensity of the reactions of the countries to be proportional to the same set of given weights. Since no theoretical model relies on such restrictive assumptions, we regain flexibility in the empirical analysis by using Vector Autoregressive (VAR) models, where the sign and intensity of countries’ reactions may be heterogeneous. Using a Monte Carlo exercise, we show that if the objects of interest are the reactions to shocks in the tax rates of the other countries and there is no a priori knowledge of the structure of the economy, it can be convenient to opt for a VAR rather than a panel setup. A Bayesian VAR model on real data shows that strategic complementarity between some countries may co-exist with strategic substitutability between other countries, a finding with potential policy implications on the debate on tax competition.


2021 ◽  
Vol 7 (3) ◽  
pp. 324-342
Author(s):  
David Yaskewich

A 2017 gambling expansion bill in Pennsylvania included a provision that gave municipalities the option to ban a new casino from opening within their borders.  This paper examined how different factors influenced local decisions on whether to allow casino gambling.  Multilevel linear probability models indicated that municipalities were influenced by economic characteristics, as evidenced by a higher likelihood of allowing casinos in communities with lower levels of household income.  Results also suggested that municipalities were influenced by variables related to tax competition and the percentage of residents who were black.  The findings of this study identify factors that may influence municipal governments when given the authority to opt out of a state gambling expansion capable of generating a new source of local tax revenue.


Author(s):  
Kate Hynes ◽  
Yongzheng Liu ◽  
Jie Ma ◽  
Ian Wooton
Keyword(s):  

2021 ◽  
pp. 1-19
Author(s):  
KAUSHAL KISHORE

In a dynamic two-period model of tax competition, where competing countries strategically choose foreign investment restrictions which increases the sunk cost of investments, we show that choosing a higher level of restriction is beneficial for the competing countries. A higher level of restriction reduces competition and increases tax revenue in the later period, which allows the government to offer large tax holidays during the initial period of investment. The result is counter-intuitive as it is widely believed that sunk cost reduces foreign direct investments. Moreover, even though competing countries are ex-ante symmetric, the equilibrium choice of the level of restrictions may not be equal.


Author(s):  
Mutsumi Matsumoto

AbstractThe literature on tax competition has argued that tax base equalization, which reduces regional disparities in tax bases, can serve as a means of internalizing horizontal and vertical fiscal externalities. This argument assumes that each government relies on a single tax base (a regional tax on mobile capital and a federal tax on savings). This paper considers the case in which a distortionary labor tax is also available. Internalizing fiscal externalities requires that while the regional capital tax base is fully equalized, a region’s equalization entitlement for the labor tax is positive when its tax base is “larger” than the average tax base of all regions. This efficient tax base equalization system is incompatible with the primary objective of fiscal equalization.


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