Tax Interaction Dynamics Among Belgian Municipalities 1984-1997

CORE Discussion Paper No. 2005/48

22 Pages Posted: 30 Jun 2006

See all articles by Jean-Francois Richard

Jean-Francois Richard

University of Pittsburgh - Department of Economics

Henry Tulkens

Catholic University of Louvain - Center for Operations Research and Econometrics (CORE)

Magali Verdonck

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Date Written: July 2005

Abstract

The purpose of this paper is to test econometrically the existence of fiscal interactions between Belgian municipalities. At the time of writing, the motivation was to provide scientific support to the lively debate on fiscal competition that took place among Belgian politicians in the late nineties.

Two types of taxes are considered, for which Belgian municipalities have the decision power as to rates: the centimes additionnels on the personal income tax and the précompte immobilier which is a property tax. A dynamic adjustment model is specified and estimated using panel data for 598 municipalities over 15 years.

The empirical results obtained bear upon two main points: (i) Some interaction definitely has prevailed between the municipalities' fiscal choices made during the observation period, for both taxes; (ii) However, the adjustment reactions to the other municipalities' fiscal choices have occurred over time at the very low yearly pace of 6% and 10%, respectively, of the discrepancy between the actual rates and the preferred rates.

Suggested Citation

Richard, Jean-Francois and Tulkens, Henry and Verdonck, Magali, Tax Interaction Dynamics Among Belgian Municipalities 1984-1997 (July 2005). CORE Discussion Paper No. 2005/48, Available at SSRN: https://ssrn.com/abstract=912251 or http://dx.doi.org/10.2139/ssrn.912251

Jean-Francois Richard (Contact Author)

University of Pittsburgh - Department of Economics ( email )

4901 Wesley Posvar Hall
230 South Bouquet Street
Pittsburgh, PA 15260
United States
412-648-1750 (Phone)

Henry Tulkens

Catholic University of Louvain - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium
+32 10 47 43 21 (Phone)
+32 10 47 43 01 (Fax)

Magali Verdonck

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
37
Abstract Views
804
PlumX Metrics