FISCAL ILLUSION AT THE LOCAL-LEVEL - EMPIRICAL-EVIDENCE FOR THE FLEMISH MUNICIPALITIES

Fiscal illusion refers to a systematically biased perception of fiscal parameters, due to demand-side error/ignorance or supply-side abusive behaviour. As such it is a component of a more general tax choice fra mework. This paper focuses predominantly on the empirical estimation o f the four major sources of fiscal illusion, namely the flypaper effec t, renter illusion and the complexity and elasticity of tax systems. T he results - based on a dataset of 302 Flemish municipalities - on bal ance suggest the existence of important illusionary effects.