In this paper we study the regional pattern of municipal business property
tax rates in the province of British Columbia. Reduced-form tax-setting equ
ations produce some evidence that municipal governments respond to tax chan
ges in neighbouring jurisdictions. A joint investigation of the determinant
s of tax base and municipal taxation decisions, however, reveals that it is
difficult to interpret this response as arising primarily out of competiti
on 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. JEL Clas
sification: C33, H71.