Determinants of tax innovation: The case of environmental taxes in Flemish municipalities

The setting of new taxes is a notably visible act that has potential political costs. This paper explores the setting of new environmental taxes across the 308 Flemish municipalities over the period 1991-1999. We find that first adoptions of a green tax are much less likely to occur during election years but are more likely if ones' peers/neighbours (defined both geographically and ideologically) already have the tax. In addition, whilst left-wing governments are more likely to set new taxes and coalitions are more likely to set the tax than single-party governments, the greater the fragmentation of the municipal government, the lower is the likelihood that a new tax will be set.