In a decentralised tax system, the effects of tax policies enacted by one government are not confined to its own jurisdiction. First, if both the regional and the federal levels of government co-occupy the same fields of taxation, tax rate increases by one layer of government will reduce taxes...

This paper offers empirical evidence from Spain of a connection between the tax administration and the political power at the regional level. Firstly, the system of unconditional grants from the central layer of government provokes an “income effect” which disincentivises the efforts of the...