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Is Tax Harmonization Useful?

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Author Info

  • Wolfgang Eggert

    ()

  • Bernd Genser

    ()

Abstract

It is a widely acknowledged result of the literature on international tax competition that an inefficient provision of public goods can only be avoided, if taxes are sufficiently coordinated. In this paper we use a model where governments use commodity and factor taxes in the tax competition game. We show that governments will always choose a second-best efficient tax structure in the Nash equilibrium if they have access to a residence-based capital tax and either a destination-based commodity tax or a labor tax. Moreover, we show that tax competition need not foreclose third-best efficiency in a world with a restricted tax policy toolkit. Copyright Kluwer Academic Publishers 2001

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File URL: http://hdl.handle.net/10.1023/A:1011243613681
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Bibliographic Info

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 8 (2001)
Issue (Month): 4 (August)
Pages: 511-527

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Handle: RePEc:kap:itaxpf:v:8:y:2001:i:4:p:511-527

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Web page: http://www.springerlink.com/link.asp?id=102915

Related research

Keywords: international taxation; tax interaction; constrained efficiency;

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References

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  1. Razin, Assaf & Sadka, Efraim, 1991. "International tax competition and gains from tax harmonization," Economics Letters, Elsevier, vol. 37(1), pages 69-76, September.
  2. WILDASIN, David E., . "Interjurisdictional capital mobility: Fiscal externality and a corrective subsidy," CORE Discussion Papers RP -831, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Huizinga, H.P. & Nielsen, S.B., 1995. "Capital income and profits taxation with foreign ownership of firms," Discussion Paper 1995-82, Tilburg University, Center for Economic Research.
  4. Ben Lockwood & David Meza & Gareth Myles, 1994. "When are origin and destination regimes equivalent?," International Tax and Public Finance, Springer, vol. 1(1), pages 5-24, February.
  5. Wolfram Richter, 2000. "An Efficiency Analysis of Consumption and Production Taxation with an Application to Value-Added Taxation," International Tax and Public Finance, Springer, vol. 7(1), pages 23-41, February.
  6. Sinn, Hans-Werner, 1997. "The selection principle and market failure in systems competition," Munich Reprints in Economics 19854, University of Munich, Department of Economics.
  7. Haufler, Andreas, 1996. "Optimal Factor and Commodity Taxation in a Small Open Economy," Munich Reprints in Economics 20393, University of Munich, Department of Economics.
  8. Wilson, John D., 1986. "A theory of interregional tax competition," Journal of Urban Economics, Elsevier, vol. 19(3), pages 296-315, May.
  9. Bucovetsky, Sam & Wilson, John Douglas, 1991. "Tax competition with two tax instruments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 333-350, November.
  10. MINTZ, Jack & TULKENS, Henry, . "Commodity tax competition between member states of a federation: equilibrium and efficiency," CORE Discussion Papers RP -693, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Andreas Haufler, 1996. "Optimal factor and commodity taxation in a small open economy," International Tax and Public Finance, Springer, vol. 3(3), pages 425-442, July.
  12. Kanbur, Ravi & Keen, Michael, 1991. "Tax competition and tax coordination : when countries differ in size," Policy Research Working Paper Series 738, The World Bank.
  13. Jack M. Mintz, 1999. "Globalization of the Corporate Income Tax: The Role of Allocation," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 56(3/4), pages 389-, July.
  14. Roger H. Gordon, 1990. "Can Capital Income Taxes Survive in Open Economies?," NBER Working Papers 3416, National Bureau of Economic Research, Inc.
  15. Diewert, W E & Turunen-Red, A H & Woodland, A D, 1989. "Productivity- and Pareto-Improving Changes in Taxes and Tariffs," Review of Economic Studies, Wiley Blackwell, vol. 56(2), pages 199-215, April.
  16. Zodrow, George R. & Mieszkowski, Peter, 1986. "Pigou, Tiebout, property taxation, and the underprovision of local public goods," Journal of Urban Economics, Elsevier, vol. 19(3), pages 356-370, May.
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Cited by:
  1. Clemens Fuest & Bernd Huber & Jack Mintz, 2003. "Capital Mobility and Tax Competition: A Survey," CESifo Working Paper Series 956, CESifo Group Munich.

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