Clientelism and decentralization of the rural property tax in Brazil

Abstract:

This article assesses whether the management of rural land taxes by Brazilian municipal governments is different when mayors have connections to agricultural interests. We examine the hypothesis from the literature on clientelism suggesting that mayors with links to agriculture would tend to favor their peers by maintaining high levels of tax evasion and low revenues. Based on municipal data for the period from 2009 to 2016 and on the difference-in-differences method, the analysis indicates that agriculture-based mayors behave similarly to other mayors in terms of intensity of tax collection and inspection. The exception is the Northeast region of the country, where municipalities managed by a mayors linked to rural interests presented rural tax revenues that were 13.58% lower than in municipalities that were not run by rural interests. This finding confirms previous studies that indicate a greater existence of clientelist practices in that region.

Keywords:
clientelism; fiscal federalism; rural property tax; decentralization; impact evaluation