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Title:Fiscal equalization and regions' (un)willingness-to-tax: Evidence from Germany PDF Logo
Authors:Bönke, Timm
Jochimsen, Beate
Schröder, Carsten
Issue Date:2011
Series/Report no.:Economics working paper / Christian-Albrechts-Universität Kiel, Department of Economics 2011,06
Abstract:Under cooperative federalism, when an identical tax tariff applies to all regions of a federation, usually redistribution rules are implemented to smooth fiscal differences. The administration of tax collection, however, is sometimes delegated to the regional level, leaving the regional administrations some discretion concerning the auditing of tax returns. Building on a stylized model, we show that under such conditions granted discretionary tax deductions at the level of tax units is positively related to state-specific marginal rates of loss (MRL), i.e., the fraction of an additional tax Euro raised in a region that the fiscal-equalization system redistributes to other jurisdictions. We empirically test the model's presumption using administrative income-tax micro data from Germany. Regression estimates comply with the implications of our model.
Subjects:Fiscal federalism
rate of loss
income tax returns
JEL:C21
H21
H77
Document Type:Working Paper
Appears in Collections:Economics Working Papers, Department of Economics, CAU Kiel
Publikationen von Forscherinnen und Forschern des DIW

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