Choosing between Centralized and Decentralized Models of Tax Administration

The fundamental questions addressed in this paper are the following: what is the most appropriate approach to organizing the vertical structure of tax administration, and what are the determinant factors that may make an approach more or less optimal in any particular country. We consider the theoretical arguments for and against centralized and decentralized models of tax administration and review the actual practices in a number of countries. The main conclusion is that one size does not fit all; the choices countries make in terms of their level of fiscal decentralization respond to complex agendas, which often involve political objectives. However, given the general approach to fiscal decentralization and, more in particular, revenue assignments, it is possible to identify better and worse approaches to organizing tax administration