Abstract
The purpose of this paper is to evaluate a particular competitive interaction among Brazilian states, the Fiscal War of Ports (FWP) and to verify if Resolution 13/2012, which reduced the tax rate on imported goods in interstate sales, had the desired impact. Using monthly data on state importing levels during the period January 2010- April 2015 we find evidence that Brazilian states do engage in spatial interaction, and that R13 has changed the spatial interaction among states since 2013 and more deeply in the beginning of 2014.
Highlights
Fiscal competition models usually assume that jurisdictions finance the provision of public goods with taxes on local capital
The purpose of this paper is to evaluate a particular competitive interaction among Brazilian states, the Fiscal War of Ports (FWP)
Under the Fiscal War of Ports special tax regimes took the form of tax credits over interstate sales of imported goods
Summary
Fiscal competition models usually assume that jurisdictions finance the provision of public goods with taxes on local capital. But can move to other jurisdictions in response to tax-rate differentials, while labor is typically immobile. There are two versions of these models. According to the competitive version, jurisdictions are small relative to the economy and are unable to affect the net-of-tax return to capital. Tax rates in other jurisdictions are irrelevant, and strategic behavior is absent. According to the strategic version, each jurisdiction is large relative to the economy and is able to affect the net return of capital changing its own tax rate. The tax rates in other jurisdictions must be taken into account in a given jurisdiction’s choice, leading to strategic behavior
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