Must losing taxes on saving be harmful?
AbstractInternationalization offers enhanced opportunities for individuals to place savings abroad and evade domestic saving taxation. This paper asks whether the concomitant loss of saving taxation necessarily is harmful. To this end we construct a model of many symmetric countries in which public goods are financed by taxes on saving and investment. There is international cross-ownership of firms, and countries are assumed to be unable to tax away pure profits. Countries then face an incentive to impose a rather high investment tax also borne by foreigners. In this setting, the loss of the saving tax instrument on account of international tax evasion may prevent the overall saving-investment tax wedge from becoming too high, and hence may be beneficial for moderate preferences for public goods.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Public Economics.
Volume (Year): 92 (2008)
Issue (Month): 5-6 (June)
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Web page: http://www.elsevier.com/locate/inca/505578
Other versions of this item:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
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