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Fiscal decentralization and tax collection: evidence from the rural property tax in Brazil

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  • Caldeira, Thiago Costa Monteiro
  • Ehrl, Philipp
  • Moreira, Tito Belchior Silva

Abstract

The present paper investigates whether the decentralization of the rural land property tax (ITR) in Brazil increases the aggregate volume of tax collection from this source. We apply a difference-in-differences strategy where treatment is defined as the switch from a federal administration to the decentral management of the ITR by a municipality. The panel data from 2002 to 2017 show that decentralization leads to an average increase in overall ITR collection by about 42% in the first year, which rises to 109% in the 8th year. Our results are robust to balancing with entropy weights, the anticipation of treatment as well as the multi-period staggered timing of the ITR decentralization. Due to these peculiarities of our research design, we show that the increase in ITR collection is related to a more efficient tax management, i.e., a rigorous implementation and charge of tax duties.

Suggested Citation

  • Caldeira, Thiago Costa Monteiro & Ehrl, Philipp & Moreira, Tito Belchior Silva, 2023. "Fiscal decentralization and tax collection: evidence from the rural property tax in Brazil," European Journal of Political Economy, Elsevier, vol. 78(C).
    • Handle: RePEc:eee:poleco:v:78:y:2023:i:c:s017626802300040x
    DOI: 10.1016/j.ejpoleco.2023.102396
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    More about this item

    Keywords

    Fiscal federalism; Decentralization; Taxation; Impact evaluation;
    All these keywords.

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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