publication . Preprint . 2010

Local tax interaction with multiple tax instruments: evidence from Flemish municipalities

S. VAN PARYS; B. MERLEVEDE; T. VERBEKE;
Open Access
  • Published: 01 Sep 2010
Abstract
We investigate the long run result of strategic interaction among local jurisdictions using multiple tax instruments. Most studies about local policy interaction only consider a single policy instrument. With multiple tax instruments, however, tax interaction is more complex. We construct a simple theoretical framework based on a basic spillover model, with two tax rates and immobile resources. We show that the signs of within and cross tax interaction crucially depend on the extent to which a jurisdiction mimics the other jurisdiction’s budget, and the extent to which the preference for one tax instrument is affected by the level of the same or the other tax in...
Subjects
free text keywords: tax competition; yardstick competition; local tax rates; spatial econometrics; multiple taxes; tax structure
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