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Christian-Albrechts-Universität zu Kiel

Institut für Volkswirtschaftslehre - Department of Economics
Economics Working Papers

Economics Working Papers: Abstract 2011-06


Nummer

2011-06

Autoren

Timm Bönke, Beate Jochimsen, Carsten Schröder

 

Titel

 

Fiscal equalization and regions’ (un)willingness-to-tax – evidence from Germany
Abstract Under cooperative federalism, when an identical tax tariff applies to all regions of a federation, usually redistribution rules are implemented to smooth fiscal differences. The administration of tax collection, however, is sometimes delegated to the regional level, leaving the regional administrations some discretion concerning the auditing of tax returns. Building on a stylized model, we show that under such conditions granted discretionary tax deductions at the level of tax units is positively related to state-specific marginal rates of loss (MRL), i.e., the fraction of an additional tax Euro raised in a region that the fiscal-equalization system redistributes to other jurisdictions. We empirically test the model’s presumption using administrative income-tax micro data from Germany. Regression estimates comply with the implications of our model.

Keywords: fiscal federalism, rate of loss, income tax returns

JEL classification: C21, H21, H77

 

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