Sub-national Tax Autonomy and Deficits: Empirical Results for 27 OECD Countries

Abstract

Van Rompuy P. Sub-national tax autonomy and deficits: empirical results for 27 OECD countries, Regional Studies. This paper explores the impact of the revenue mix on the budgetary performances of regions and local governments in 27 Organisation for Economic Co-operation and Development (OECD) countries from 1995 to 2010. The main data are obtained from the OECD fiscal decentralization database that distinguishes tax income according to the degree of sub-national control over own resources. The empirical results point to a positive impact of autonomous tax income on sub-national fiscal balances in contrast to tax sharing agreements. However, the positive budgetary influence of tax autonomy only prevails from a minimum share of autonomous taxes in sub-national own revenue.