Inter-municipal cooperation: which fiscal regime?

Economics

Speaker:Marie-Laure Breuill, Institut National de la Recherche Agronomique (INRA)
Date: Friday 9 December 2011
Time: 16.15
Location: STC/D

Further details

The purpose of this paper is to study the effect of inter-municipal tax cooperation on local taxation. We use a tax competition model in a two-tier framework, where two tax bases are interdependently mobile. We consider three different tax regimes: tax-base sharing for the two tax bases, tax-harmonization of one tax rate, and a mixed form of the preceding two regimes. Therefore, both horizontal externalities (at the municipal and inter-municipal level) and vertical tax externalities occur. We show that cooperation generates an inflationary effect on the tax rates, whatever the form of tax cooperation, and provide a comparison of the different tax regimes.