مالیات کسب و کار محلی و رقابت برای سرمایه: انتخاب نرخ مالیات
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|10840||2001||31 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Regional Science and Urban Economics, Volume 31, Issues 2–3, April 2001, Pages 215–245
A theoretical model describes the local choice of the tax rate on capital income. It establishes preferences and various fiscal conditions — including the tax rates of competing jurisdictions — as determinants of the tax rate. The empirical implications are tested using a large panel of jurisdictions in Germany, which have discretion in setting the local rate of the business tax. Tax competition is identified by means of instrumental variables techniques. Despite significant competition effects between local neighbors, where tax rates are strategic complements, jurisdictions are found to have some leeway in using the tax rate as an instrument of their policy. In particular, large jurisdictions set higher tax rates in interjurisdictional competition.
Public economics has become increasingly concerned with the consequences of economic integration, especially of international factor mobility. The notion that established systems of taxation face serious difficulties in capital income taxation has brought about a large literature on international tax competition. However, as compared to the theoretical and political significance of this issue the empirical literature is still on a small scale. Possibly, this is related to the difficulties of tracing back observed actions of economic agents to the national tax systems and in a more general perspective to the shape of the public sector as a whole. Given this background several researchers have found it helpful to skip the broad international perspective and to take a look at local issues. Some federal states, highly integrated, have substantial local autonomy in the public sector and offer rich observable experience with the consequences of economic integration. This article analyses local tax policy using a panel of more than 1000 jurisdictions in a major German state. The focus is on the local tax on business earnings and business property. An attractive feature of this case lies in its resemblance to the theoretical case of source-based capital taxation, which is important in the literature on tax competition. As the business tax constitutes the main local competence in tax policy in Germany, the set of tax instruments is restricted in such a way that governments use the distorting tax on the mobile factor, which is essential for many of the results of the tax competition literature (e.g. Wellisch, 2000). Therefore, this case allows to study the determinants of the local choice of the tax rate, and, in particular, to investigate to what extent local tax policy is involved in tax competition. The empirical analysis is based on a theoretical model of a council’s choice of the local tax rate. This model collects various important aspects from the literature in order to derive a testable set of predictions about the local tax policy. Taking into account the productivity effects of public spending as in Matsumoto (1998) tax rates of competing jurisdictions are shown to be interdependent. However, in view of large differences in terms of the population size of the local jurisdictions in Germany, the model takes account of asymmetries in tax competition following Bucovetsky (1991) and Wilson (1991). In addition, the objectives of the local councils are not assumed to be the same across jurisdictions, although, unlike Inman (1989) the focus is not on the impact of various interest groups on local policy, as a unanimous objective function of the local council is assumed. Moreover, predetermined and exogenous revenue components in the local budget, such as grants, are established as determinants of the choice of the tax rate. In the empirical investigation, observed tax rates are regressed on various local characteristics of potential influence according to the theoretical model. The tax policy of possibly competing jurisdictions is taken into account by employing observed tax rates in the nation as a whole as well as in the local neighborhood in the regression. Yet, in order to take account of the simultaneity of the observed taxing decisions predetermined or exogenous determinants of tax rates are used as instruments of neighbors’ tax policy by means of a spatial instrumental variables technique. Following Kelejian and Prucha (1998) the estimation also controls for additional spatial autocorrelation of residuals. The results confirm the existence of local tax competition, and thus support evidence by Ladd (1992), Besley and Case (1995), and Brett and Pinske (1997) for the US, as well as Seitz (1995) for Germany, and Ashworth and Heyndels (1997) for Belgium. However, the findings indicate that tax competition by no means deprives jurisdictions of all leeway in using the tax rate as an instrument of their policy. Large jurisdictions, in particular, are found to set higher tax rates. In view of the theoretical model, and given the set of control variables, this size differential is interpreted as indicating the market power of large jurisdictions (cf. Epple and Zelenitz, 1981;Hoyt, 1992). Furthermore, the endowment with fiscal revenues as well as spending mandates are reflected in the taxing decisions. Section 2 lays out a theoretical model establishing testable predictions about the local tax policy. The empirical investigation in Section 3 starts with some basic institutional facts, develops an estimation strategy and gives a description of the dataset before presenting the results. Appendix A and Appendix B contain the derivation of the comparative static properties of the theoretical model, as well as a detailed description of the sources and definitions of the data.
نتیجه گیری انگلیسی
The results are presented in Table 3. The estimated regression contains no fixed effects despite a panel of communities being used. Instead, a set of characteristics is employed capturing the cross-sectional determinants of the tax rate. Moreover, the estimation technique takes account of spatial correlation in both the dependent variable and the residuals and thus can be considered as controlling for regional effects in a constrained way (cf. Case, 1991). Note also that the regression conditions on the local collection rate in the previous year, and thus controls for various inherited conditions. Even without fixed effects the coefficient of determination shows a value of 0.9145. According to the F-statistic (F-stat.: 1.968) this is significantly lower than the value of 0.9243 for the corresponding fixed effects regression.11 Yet, since the F-statistic is invalid with heteroskedasticity, and the underlying coefficient of determination would favor any reduction in degrees of freedom, this should not be overemphasized (cf. Amemiya, 1985).The discussion of results starts with the impact of the predetermined or exogenous variables. The lagged own tax rate is significantly positive as well as lower than unity, indicating a slow adjustment of tax policy to changes in the communities’ conditions. Unconditional grants allocated to the local community exhibit significant negative effects on the tax rate. A similar effect is found for the income tax revenues. Predetermined expenditure components which reduce available funds all show positive effects, in particular the service of the local debt shows a strong effect. Also the county contributions as well as mandated welfare spending show significant positive effects, indicating that communities transmit adverse social conditions into higher local business taxation. Generally, the predetermined budget components affect tax policy in a way that a larger amount of alternative revenues and a lower amount of fixed expenditures not available for the funding of public goods lead to lower tax rates. In this context we should also note that the level of the standardized tax revenues has a negative effect, indicating that ‘rich’ communities set a lower tax rate. The theory offers the explanation that a larger amount of available funds makes a policy of increasing revenues by raising the tax rate less attractive. Turning to preferences, the demographic characteristics show the expected sign. All age groups exert a negative effect as compared to the reference group of people above 65 years. However, the effects show no monotonous effect along the lifecycle, even when standardizing the coefficients with the means of the corresponding regressors. However, this may reflect the specific responsibilities of the local public sector in Germany. Foreign nationals show a strong positive effect, indicating their lack of voting power or indicating social problems forcing governments to increase spending. The job variable did not show significant effects. However, since this variable is reported at the county level it may simply fail to pick up the local conditions. The three variables capturing religious affiliation show the hypothesized negative influence, which is possibly pointing towards charity-related crowding out of governmental policy. Taken together, although it is not possible to ensure that all underlying preferences are taken into account, the obtained results are in line with the theoretical predictions. The size of communities in terms of population rather than in terms of capital invested shows strong significant effects on the local collection rate. As dummies for density are included (especially district types 1 and 5 picking up larger cities) this result is obviously not due to price effects in urban communities related to crowding. Given the discussion about the social burden of cities it is also important to note that the size differential is not driven by welfare expenditures, as they are included among the set of regressors. However, the significant size effect might still be related to different preferences of larger jurisdictions. But, insofar as these preferences stem from different administrative obligations of larger communities, they should already be captured in the grant variable. Because, the system of fiscal federalism in Germany aims to provide jurisdictions with sufficient fiscal resources in order to meet their mandates, and systematic violations can be alleged at a state court. Although it is difficult to ensure that the size effect is not at all driven by preferences, it at least conforms to prediction (ii). The view that large cities use their market power to require a tax premium (cf. Hoyt, 1992) is supported in particular, since the interjurisdictional competition effects indicate that the relevant market of the mobile factor is regional. Concerning intercommunity competition in tax rates, the results show a significant positive impact of the local neighbors’ tax rate. It should be stressed that this result has been obtained by instrumental variable techniques, which take account of the simultaneity of taxing decisions of competing jurisdictions. The set of instruments consists of all regressors — except for the neighbor’s tax rate — plus spatial lags of all those predetermined or exogenous regressors which are reported at community level, except for the border variables and the age structure variables.12 Note that the orthogonality of the set of instruments with respect to the residuals cannot be rejected, since the test of overidentifying restrictions shows no significance at the 10% level (13 overidentifying restrictions). The national collection rate also shows a significant impact on the local collection rate, which is, however, negative. Note, that this result is not driven by the trend, since it was also obtained when removing the trend from the regression. The joint impact of national (τNt) and local collection rates as found in the regression is View the MathML source The difference in the signs of national and local neighbors’ tax rates indicates that the local jurisdiction follows the taxing decisions of its competing local neighbors, but responds inversely to tax increases outside of its region. This might be explained by differences in the degree of capital mobility at the local and the national level. A nationwide tax increase might simply serve as a beneficial fiscal externality to the local tax base without changing the elasticity of the local tax base with respect to local tax rates. Thus, the local jurisdiction might react with a tax reduction. Actually, the neighboring jurisdictions will lower their tax rates as well and the estimated simultaneous relationship suggests that the joint effect is slightly larger. The observed direct interdependence between tax rates of local neighbors, however, indicates a much stronger mobility of capital at the local level, where — in the light of the theory — a tax increase of competing jurisdictions reduces the elasticity of the capital supply with respect to the local tax rate. The local jurisdiction, therefore, responds with a tax increase. This response of the tax rate to a fiscal externality is consistent with the theoretical discussion on the underprovision of public infrastructure (e.g. Matsumoto, 1998). The border variables show no direct significance, but for their spatial lags, i.e. a weighted average of the neighbors of border communities, we find significant negative effects. This could point to the inherited peripheral status of the communities situated very close to the border, whereas communities located within a distance of 30 km to the border face significant cross-border competition.