Tax harmonization leads to identical tax rates in German municipalities.
The study looked at how tax policies in German municipalities are influenced by each other, even though they have the freedom to set their own business tax rates. They found that many municipalities end up setting the same tax rates, which is not due to higher-level government rules. Small towns and towns in the same area are more likely to do this. It seems like towns are influenced by what their neighbors are doing when setting tax rates.