The determinants of municipal tax rates in British Columbia

In this paper we study the regional pattern of municipal business property tax rates in the province of British Columbia. Reduced-form tax-setting equations produce some evidence that municipal governments respond to tax changes in neighbouring jurisdictions. A joint investigation of the determinants of tax base and municipal taxation decisions, however, reveals that it is difficult to interpret this response as arising primarily out of competition over tax base. There is also some evidence that municipal tax rates are sensitive to taxes set on the same base by super-municipal bodies.