Abstract:
This paper investigates the tax sharing rates among sub-provincial governments systematically. We start with describing the stylized facts of tax sharing among sub-provincial governments since the 1994 tax reform. Then we investigate the determinants of tax sharing rates. Our results show that for both province-level and prefecture-level governments, they hold higher shares if they have larger control over industrial firms in their jurisdictions. For province-level government, the more serious the economic inequality of sub-provincial regions, the lager sharing rates they have. The higher level governments tend to have higher shares on value-added taxes and lower shares on business taxes if their jurisdictions have a higher degree of industrialization. From the viewpoint of economic theory and empirical application, we believe that the tax sharing rates among sub-provincial governments can serve as an alternative index of fiscal decentralization.
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