Tax Mimicking in Local Business Taxation: Quasi-Experimental Evidence from Portugal

47 Pages Posted: 8 Dec 2017  

Mariana Lopes da Fonseca

Max Planck Institute for Tax Law and Public Finance

Multiple version iconThere are 2 versions of this paper

Date Written: December 7, 2017

Abstract

I exploit an exogenous reform introducing a local business tax in Portugal to study tax mimicking among jurisdictions. The identification strategy relies on a quasi-experimental difference-in-differences methodology and heterogeneity in treatment intensity. Results provide evidence of significant short-run tax mimicking that decreases over time. I study possible generating processes underlying the strategic interaction among municipalities and find significant evidence of electoral concerns. These electoral concerns are not met with electoral consequences at the local elections, which may be behind the diffusion of local business taxation in the long run.

Keywords: tax mimicking, yardstick competition, local reform

JEL Classification: D72, H71, H77

Suggested Citation

Lopes da Fonseca, Mariana, Tax Mimicking in Local Business Taxation: Quasi-Experimental Evidence from Portugal (December 7, 2017). Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2017-8. Available at SSRN: https://ssrn.com/abstract=3083924 or http://dx.doi.org/10.2139/ssrn.3083924

Mariana Lopes da Fonseca (Contact Author)

Max Planck Institute for Tax Law and Public Finance ( email )

Marstallplatz 1
Munich, 80539
Germany

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