Size of taxation and tax decentralization

The paper deals with a mutual relationship between the size of taxation and the tax decentralization ratio. The size of taxation in an economy is approximated using a simple tax-to-GDP ratio, a tax decentralization ratio by share of subnational government tax revenue on general government tax revenue. Due to a lack of data, the subnational government's real decision-making power over taxation is not considered. The aim of the paper is the evaluation of a mutual relationship of both variables and a discussion of the economic background of the relationship. The paper departs from the normative theory of fiscal federalism and also from the positive approach to the problem. Quantitative analysis is based on panel data from countries of Europe from 2005 to 2020, taken from the IMF GFS database.