Abstract: The interactive relationship between local government officials has a significant impact on the formation of local economic policies. Based on the micro data of China’s industrial enterprise and the data of local official, this paper conducts an empirical analysis of the impact of the similarity between local party and government leaders on the local effective tax rate. The findings show that: (1) the effective tax rate of the local enterprises will drop significantly by 0.32% to 0.48% in the cities where the Party sectaries have the same age as the mayors; (2) the effective tax rate of the local enterprises will also drop significantly in the cities where the Party sectaries have the same level of education or Party standing as the mayors, but the same gender shows no such phenomenon; (3) the impact of official homogeneity is more significant on non-state-owned enterprises and the areas with larger governmental scales. Therefore, under the background of China’s vigorous efforts to reduce the tax burden of enterprises and to improve the business environment, more attention should be paid to optimize the official collocation within the local governments and reducing the tax burden of local enterprises. This is especially important for the reduction of the tax burden of private-owned firms and the improvement of the business environment in the regions with poorer institutional environment.

Key words: official collocation; institutional environment; local effective tax rate; characteristics of officials