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Well, according to some sources it worked that way at the begining, but in conquest (the version we have here on steam) they changed (nerfed) it to be the local thing only. So still preferable to build somewhere away, but only for that one particular city.
It's not too big however, and I definitely wouldn't call it as big as second capital but it's something.
Key takeaways, assuming we don't use Communism:
0. There are two factors for corruption/waste and the two added together is the actual corruption/waste.
1. The first factor depends on the distance to the Palace or the Forbidden Palace, whichever is smaller, so Forbidden Palace reduces this factor for all nearby cities.
2. The second factor depends on the distance to the Palace, not the Forbidden Palace.
(More precisely, it depends on the rank of this distance.)
However, the presence of Forbidden palace gives a global reduction to this second factor; this noticeably affect all cities in the realm except for the capital who doesn't care. (I think it's about 30-40% of this second factor, and maybe typically 10%-20% to the actual corruption/waste?)
3. An exception: the city that has Forbidden Palace has its corruption capped at 20%, or 10% with courthouse or police station, or 0% with both. Pretty often that's a drastic change.