TITLE:
Economic Integration, Tax Erosion, and Decentralisation: An Empirical Analysis
AUTHORS:
Francesca Gastaldi, Paolo Liberati, Antonio Scialà
KEYWORDS:
Economic Integration; Tax Erosion; Fiscal Federalism; Implicit Tax Rates; Tax Competition
JOURNAL NAME:
Modern Economy,
Vol.4 No.10A,
October
28,
2013
ABSTRACT: This paper addresses the issues of whether and how economic integration can affect the ability of the central governments to raise tax revenues and lead to a greater decentralisation of the public sector. To this purpose, a country-specific measure of tax erosion is derived. That is used as a determinant of the degree of fiscal federalism. We find that an increase of economic integration causes a decline of the implicit tax rates on mobile capital and the process of tax erosion positively contributes to the growth of public sector decentralisation.