Impact of grants on tax effort of local government
By: Rajaraman, Indira.
Contributor(s): Vasishtha, Garima.
Material type:
ArticlePublisher: 2000Description: p.2943-948.Subject(s): Taxation | Local government
In:
Economic and Political WeeklySummary: This paper examines the impact of state-local grants on tax effort of rural local governments (panchayats) for Kerala state using data for 1993-94. After controlling for tax capacity we find a negative impact on own tax revenue of lump sum `untied' grants that are predictable and unvarying. The reduction in own tax revenue is the result of a selective slackening of tax effort. The post-grant pattern of tax incidence will therefore be less transparent than the nominal pattern, less preserving of voter preferences, and possibly driven by corruption towards greater regressivity. The data contradicts the flypaper effect and also theories of fiscal effects of ethnic fragmentation. - Reproduced
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Articles
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Indian Institute of Public Administration | Volume no: 35, Issue no: 33 | Available | AR46308 |
This paper examines the impact of state-local grants on tax effort of rural local governments (panchayats) for Kerala state using data for 1993-94. After controlling for tax capacity we find a negative impact on own tax revenue of lump sum `untied' grants that are predictable and unvarying. The reduction in own tax revenue is the result of a selective slackening of tax effort. The post-grant pattern of tax incidence will therefore be less transparent than the nominal pattern, less preserving of voter preferences, and possibly driven by corruption towards greater regressivity. The data contradicts the flypaper effect and also theories of fiscal effects of ethnic fragmentation. - Reproduced
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