Empirical Evidence on Tax Cooperation Between Sub-Central Administrations
IEB Working Paper N. 2015/07
28 Pages Posted: 20 Mar 2015
Date Written: March 2, 2015
Abstract
The literature on horizontal tax interdependence pays limited attention to interactions in administrative policies, although they can play a large role in determining the amount of tax revenues collected. We investigate the incentives for sub-central tax authority cooperation in a decentralized context, with the aim of identifying the determinants of that cooperation. Our results are congruent with standard theory; in particular, the existence of reciprocity is essential for sharing tax information, but there is sluggishness in this process, which is partly the result of the short-sighted behaviour of tax authorities influenced by budget constraints. Hence, this is good news for the functioning of a decentralized tax administration, as in the medium-long run the gains to be made from sharing tax information are achieved.
Keywords: Tax information sharing, reciprocity, fiscal federalism
JEL Classification: H71, H77, H83
Suggested Citation: Suggested Citation