We analyze how vertical or horizontal fiscal equalization affects the overprovision of local public goods due to vertical fiscal externality, when there is tax evasion. The overspending incentive of regional governments is examined in the cases of fiscal equalization based on pretax earned income and on reported taxable income. We show that a more efficient level of regional public expenditure is associated with a vertical equalization scheme based on a proxy of earned income taken from national-accounts data.

Revenue Equalization Systems in a Federation with Tax Evasion / L.Grazzini; A.Petretto. - In: FINANZARCHIV. - ISSN 0015-2218. - STAMPA. - 68:(2012), pp. 303-330. [10.1628/001522112X653859]

Revenue Equalization Systems in a Federation with Tax Evasion

GRAZZINI, LISA;PETRETTO, ALESSANDRO
2012

Abstract

We analyze how vertical or horizontal fiscal equalization affects the overprovision of local public goods due to vertical fiscal externality, when there is tax evasion. The overspending incentive of regional governments is examined in the cases of fiscal equalization based on pretax earned income and on reported taxable income. We show that a more efficient level of regional public expenditure is associated with a vertical equalization scheme based on a proxy of earned income taken from national-accounts data.
2012
68
303
330
L.Grazzini; A.Petretto
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Utilizza questo identificatore per citare o creare un link a questa risorsa: https://hdl.handle.net/2158/648505
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