Intergovernmental Fiscal Transfers and Tax Efforts: Evidence from Japan

Miyazaki, Takeshi (2016): Intergovernmental Fiscal Transfers and Tax Efforts: Evidence from Japan.

Abstract

The present study examines the incentiv¬e effects of fiscal equalization transfers on local corporate tax rates from theoretical and empirical perspectives. The study focuses on additional corporate tax on capital, which is exempt from calculations of equalization grants. A theoretical investigation reveals that a rise in equalization rate increases additional capital tax rates. The theoretical prediction is empirically examined using panel data of Japanese municipalities for 1990–2000. It is found that a higher equalization rate in fiscal equalizing transfers gives municipalities an incentive to raise corporate tax rates exempt from the transfer scheme.

• Item Type: MPRA Paper
• Language: English
• Keywords: Intergovernmental fiscal transfers; regression discontinuity design; tax competition; tax effort
• Subjects: H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations; H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H71 - State and Local Taxation, Subsidies, and Revenue; H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H77 - Intergovernmental Relations ; Federalism ; Secession

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