Tax Decentralization Research Articles

Discovering tax decentralization: does it impact marginal willingness to pay taxes?

Discovering tax decentralization: does it impact marginal willingness to pay taxes?

Profit Tax as a Character of Regional Budget of Our Time

The authors develop approaches to tax decentralization based on the theory of imperfect institutions by T. Eggertsson, in terms of the critically important profit tax for regional budgets of Russia. We see the goal of our research in finding a balance between the action of formal rules and informal, social norms, technologies, and models for distributing the profits of the largest Russian companies as a tax base between the federal center of Russia and the regions depending on the actual location of employees and assets. The article is devoted to the action of a successful and unique formal rule of the tax institution for the Russian Federation – the formation of consolidated groups of taxpayers (CGT). The novelty of the article lies in the study of the phenomenon of transformation of the domestic system of paying profit tax in 2023 as a replacement of one formal rule (action of CGTs) with another formal rule – the introduction of a new excess profit tax for Russia. An empirical study of the regional distribution of payments of legal entities-payers of profit tax according to the formal rules of the CGTs from among the largest Russian companies registered outside Moscow was conducted. Based on the results of the study, a general conclusion was made about the acute contradiction of the current economic policy in Russia in the content of the tax institution: between the new informal social norm on territorial decentralization of the largest Russian companies and the opposite formal rules of tax centralization in terms of profit tax. In this regard, the current policy of coincidence of territorial and tax decentralization in terms of state-owned companies in China deserves attention.

Tax Decentralization, Preferences for Redistribution, and Regional Identities

Tax Decentralization, Preferences for Redistribution, and Regional Identities

Impact of Fiscal Decentralization on Fiscal Stance in EU: Real Deal or Econometric Illusion?

This paper aims to examine how cyclically-adjusted primary balance (CAPB) in EU countries responded to the expenditure and tax decentralization. We contribute to the literature by three important conclusions. First, estimation results indicate that CAPB positively responded to expenditure decentralization, and negatively responded to tax decentralization. Second, fiscal decentralization seems to be driven by the determinants exogenous to primary balance. Third, variables deemed as the “good” instruments in the existing literature fail to explain within variations of the fiscal decentralization indicators. We hypothesized that negative impact of tax decentralization on the primary balance is transmitted through the government revenues, but further research is needed to resolve this puzzle.

Taxation and Mobility: Evidence from Tax Decentralization in Italy

Taxation and Mobility: Evidence from Tax Decentralization in Italy

О возможностях налоговой децентрализации в России

During the structural transformation of the Russian economy, it is especially important to ensure the balance of consolidated regional budgets, in particular through tax decentralization. The article presents the results of modeling the redistribution of tax revenues between the federal and regional levels of the budget system. The purpose of modeling was to find such parameters of tax decentralization which do not worsen the horizontal balance of consolidated regional budgets. The scientific novelty of the paper lies in modeling the effects of tax decentralization on the level of differentiation of regional tax revenues according to the latest available tax and budget reporting data for 2019–2022. As a result, it was shown that an increase in regional shares for personal income tax, certain components of the mineral extraction tax, water tax and fees for the use of water biological resources up to 100% will not lead to a significant increase in inter-regional differentiation of tax revenues. The prospects of the study are to take into account the impact of the structural transformation of the economy on the territorial distribution of tax bases and the level of taxation, as well as to detail the calculations for personal income tax and mineral extraction tax as new data are accumulated.

Tax Decentralization in the Aspect of Tax Sovereignty: Experience of the Federal Republic of Germany

Tax Decentralization in the Aspect of Tax Sovereignty: Experience of the Federal Republic of Germany

Tax Decentralization and Tax Reform in Spain in the European Union Context

Tax Decentralization and Tax Reform in Spain in the European Union Context

Tax Decentralization – Approaches to Vertical Tax Revenue Structuring in the Public Sector

Tax Decentralization – Approaches to Vertical Tax Revenue Structuring in the Public Sector

When Think Tanks Refuse Thinking: Why American Pro-Market Conservatives Oppose Market Integration

AbstractAmerican pro-market conservatives often oppose use of federal authority to rein in anti-competitive behavior by market actors. Competitive barriers, whether created by local jurisdictions or the absence of national competitive rules, go unaddressed. In international comparison, especially considering the European Union's use of central authority for market openness, this is quite puzzling. Based on interviews and archival research, I trace inattention to market barriers to contradictions within Hayek's neoliberalism and an enthusiastic reception within the American academy of one possible interpretation of those writings. This conception of markets—competitive federalism—diffused into the conservative law and economics movements, think tanks, and eventually mainstream conservative politics. It permitted conservatism to align a strong pro-market rhetoric with demands for states’ rights and federal retrenchment, albeit side-stepping many significant issues in economic theory and policy. Thus, conservatives pursue spending and tax cuts, deregulation and decentralization, often to the detriment of market openness.

Tax decentralization notwithstanding regional disparities

In assessing tax decentralization optimality, a dilemma between efficiency and redistribution emerges: tax decentralization enhances fiscal discipline, but may also widen interregional disparities by triggering tax competition over mobile tax bases. We present a model that formalizes this trade-off, and find that tax decentralization can be optimal even under Rawlsian social preferences which only weight the welfare of the poorest region in the economy. We also revisit the empirical relationship between tax decentralization and regional disparities. Our estimates uncover a hump-shaped profile, which can be compatible with our normative prescriptions when social aversion for interregional inequality is low.

Fiscal federalism and income inequality: An empirical analysis for Switzerland

Traditional theory implies that fiscal federalism hinders redistribution and increases inequality. Decentralization might however improve predistribution. To obtain more precise empirical evidence on this relationship we introduce an interaction between tax decentralization and jurisdictional fragmentation and analyze its impact on pre- vs. after-tax inequality. The empirical strategy relies on the unique institutional setting and data consistency in Switzerland which allows to exploit cantonal variance since 1945. According to our findings, tax decentralization reduces income inequality as long as jurisdictional fragmentation remains limited. Significant effects in pre-tax income suggest an impact via the predistribution instead of the redistribution channel.

Empirical Implications of Decentralization Dimensions and the Role of Political Institutions in the Economic Growth of Pakistan

Decentralization is the fundamental policy variable used to enhance the allocative efficiency through public spending / tax priorities, subject to the local demand. The current study evaluates the impact of the various dimensions of decentralization on the economic growth of Pakistan for the years 1972-2018. Ng-Perron tests and Kwiatkowski-Phillips-Schmidt-Shin (KPSS) were applied to fix the unit root problem in the time series data. To find the cointegration among decentralization, the role of institutions, and economic growth the Autoregressive Distributed Lag Approach (ARDL) was used. The outcomes suggested that tax decentralization is a growth promoting policy. On the contrary, administrative and political decentralization negatively affect the economic growth. The analysis shows that political freedom also has a growth retarding impact on the economy. The current study is useful regarding the policy implications of the process of decentralization.

Бюджетная децентрализация в пандемию и постпандемийных условиях

In 2020, many countries, including Russia, faced a unique situation in which subnational authorities were forced to take on new powers to combat the pandemic and its consequences. At the same time, fiscal decentralization, which can be characterized by indicators of decentralization of income, expenditures or as tax decentralization, has decreased. The share of intergovernmental transfers in the revenues of regional budgets has increased. Before that, attempts to increase the role of the regional level in the country’s budget system were made in Russia, but they usually ended in failure. The article shows that the multidirectional trends of the 2020 crisis determined the new state of regional budgets and their dependence on the federal center. At the same time, it is transfers from the federal budget that have become the leading factor in resilience to shocks in regional budgets.

Tax decentralization in Ukraine: problems and prospects

The paper examines the essence of the concept of “tax (fiscal) decentralization” according to different views of domestic and foreign scholars. The theoretical concept of tax (fiscal) decentralization is analyzed and defined. The stages of the legislative basis for tax decentralization reform in Ukraine are studied, in particular, the norms of the Law “On Amendments to the Budget Code of Ukraine on Reform of Intergovernmental Relations” and “The Concept of Reforming Local Self-Government and Territorial Organization of Power” are considered and analyzed. It is determined what types and amounts of tax revenues go to local budgets according to the introduced legislative changes. The dynamics of own revenues of local budgets during 2014–2019 is studied and the diagram is constructed. The dynamics and structure of tax revenues to local budgets by types of taxes during the period of decentralization reform in Ukraine are considered. Revenues for such types of taxes as income tax, state duty, environmental tax, domestic taxes, local taxes, personal income tax and the general dynamics of tax revenues were studied. The dynamics of revenues to the consolidated budget of Ukraine is studied. The dynamics of the share of local budget revenues in the consolidated budget revenues of Ukraine is calculated and analyzed. A comparison of local budget revenues and intergovernmental transfers during the period of decentralization reform was made. As a result, the lack of orientation of the country's budget policy to the policy of fiscal decentralization was confirmed. The problems of tax decentralization have been identified, among which the main problem is the lack of orientation of the country's budget policy to the policy of fiscal decentralization. Measures to improve the process of tax decentralization in Ukraine have also been proposed, among which the development of such measures that would allow local budgets to receive both additional tax opportunities and optimize expenditures is a priority.

DAMPAK PELIMPAHAN WEWENANG PEMUNGUTAN BPHTB DARI PEMERINTAH PUSAT TERHADAP PENDAPATAN ASLI DAERAH KOTA PONTIANAK

The willingness of the central government in embody regional autonomy and tax decentralization was implemented by applying Law Number 28 of 2009 concerning Regional Taxes and Regional Retribution. Pontianak City Government issued Regional Regulation No. 6 of 2010 concerning Regional Taxes, the transfer of authority delegation expected to have a positive impact on the receipt of PAD from BPHTB. The purpose of this study is to analyze the impact of BPHTB transfers on increasing PAD before and after delegation of authority in Pontianak City and to understand the interactions that involved in the implementation of BPHTB collection in Pontianak City. The analytical method uses descriptive analysis techniques with the type of semi-standard interviews and quantitative analysis with ratios that are completed with a simple statistical test. The results showed there were differences in the average value between before and after the transfer of BPHTB collection authority so that there was a difference in delegation of BPHTB collection authority over the results of BPHTB revenue. In implementing it, several agreements were needed that needed steps to be taken to receive BPHTB receipts.

DECENTRALIZED TAX REVENUE, INSTITUTIONAL COMPLEMENTARITY AND ECONOMIC GROWTH: A TIME SERIES ANALYSIS OF PAKISTAN

Fiscal decentralization is one of the major policy variables to attain economic efficiency. The present study examines the impact of decentralized taxes on the economic growth of Pakistan from 1976 to 2018. For examining the stationarity of variables, Kwiatkowski-Phillips-Schmidt-Shin (KPSS) and Ng-Perron unit root Tests are used. Autoregressive Distributed Lag Approach (ARDL) is used for co-integration among the variables of the model. The results suggest that decentralized tax revenue i.e. income tax decentralization and sales tax revenue with political institutions have growth promoting impact on the economy of Pakistan. With strong institutions, provincial governments can give better results while transferring responsibility of collecting income tax from federal to provincial level.Keywords: Stationarity, Income tax and sales tax, decentralization, political institutions, economic growth.JEL Classifications: H2, H77, O1DOI: https://doi.org/10.32479/ijefi.9724

Manager or professional politician? Local fiscal autonomy and the skills of elected officials

We provide a theoretical and empirical assessment of why local fiscal autonomy can affect the skills of elected officials in sub-national governments. We first develop a model of politics with different types of politicians and show that – following a tax decentralization reform increasing local fiscal autonomy – politicians with high administrative skills are elected in rich jurisdictions while politicians with high political skills are elected in poor ones. As a result, voter welfare increases only, or mainly, in rich jurisdictions. We then look for empirical support to these predictions by exploiting the decentralization reforms affecting Italian municipalities in the '90s. These reforms introduced both the direct election of the mayor and new autonomous tax tools for municipalities characterized by large differences in their tax bases. Our estimates – robust to several alternative stories – emphasize a differential change in elected officials at the municipal level between rich and poor jurisdictions. These findings provide a new explanation for the observed poor performance of local governments largely financed by grants.

Tax behaviour relating to the review of a revised regional tax policy: a study in Greece

The failure over time of the tax system in Greece to harmonize with a sound and efficient fiscal mix raises questions about the possibility of a radical restructuring. The last decade of continuous tax reforms has neither particularly restricted the black economy nor provided the government with fresh fiscal resources, and it has outgrown its arrears. A socially acceptable fiscal policy may lead to a new, sound fiscal policy mix. Tax restructuring that strengthens the tax base at the regional, local or European level—compared to its structuring at the one-sided governmental level to date—may be a key factor in the social acceptance of a new tax system. The degree of tax decentralization of the applied tax policy is likely to improve fiscal order and management on the one hand and, on the other hand, enhance tax revenues by enhancing tax compliance.

Tax-Induced Transfer of Residence: Evidence From Tax Decentralization in Italy

This paper studies the effects of local income taxation on tax base and individual mobility since the early 2000s in Italy. Over this period of tax decentralization, regions and municipalities have been granted greater power to set different tax rates across income brackets. We combine novel fine-grained data on the universe of tax residence’s transfers with 89,860 local income tax changes and income bracket-by-municipality-level panel data on the tax base. We propose different empirical strategies, resting on tax rate variations both over time and across individuals within locations. We find that taxation significantly affects the location of the tax base. The mobility response mostly reflects tax residence relocation and involves a separation between residence and workplace. Responses strongly vary by gender, education, civil status and occupations. Yet, our estimates imply that efficiency losses due to tax-induced mobility are relatively small, thus making local redistribution feasible at least in the medium-run.