| By: |
Giese, Henning;
Heinemann-Heile, Vanessa |
| Abstract: |
This study analyzes whether and to what extent the provision of public goods
and firms' trust in local governments' handling of local business tax revenues
are associated with firms' willingness to pay local business tax. Using survey
data on German small- and medium-sized firms, we find that the average
perceived provision of public goods is not associated with the willingness to
pay local business tax. Separating public goods into private- and
business-related public goods, we find that the perception of public goods
related to the private sphere of firms' decision-makers is associated with an
increase in firms' willingness to pay local business tax by about 10%.
However, public goods related to the business sphere show no similar
association. Contradictory to the perceived provision of public goods, we find
surprisingly no association between firms' willingness to pay local business
tax and the actual provision of public goods. Trust in local governments'
handling of tax revenue increases firms' willingness to pay local business tax
significantly, with an effect size of about twice as large as for the
perception of provided private-related public goods. These findings indicate
that the handling of tax revenues exerts a more pronounced influence on firms'
willingness to pay than the actual utilization of these revenues. Documenting
tax revenue implications, we further show that the average willingness to pay
local business tax within a local government is associated with a significant
decrease in tax avoidance by about 10%. Our results inform local governments
about how the provision of public goods and the building of trust can
sustainably contribute to firms' willingness to pay local business tax. Thus,
our results contribute to the understanding of how taxes can be efficiently
collected and effectively used. |
| Keywords: |
Tax Perception, Business Taxation, Tax Avoidance, Public Goods, Tax Revenue |
| JEL: |
H25 H26 H41 H71 D91 |
| Date: |
2024 |
| URL: |
https://d.repec.org/n?u=RePEc:zbw:arqudp:303521 |