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The Efficiency of “Benefit-Related” Business Taxes

Author

Listed:
  • Elisabeth Gugl

    (Department of Economics, University of Victoria)

  • George R. Zodrow

    (Baker Institute for Public Policy, Rice University; Centre for Business Taxation, Oxford University)

Abstract

Most of the tax competition literature focuses on the provision of local public services to households. However, a number of papers, dating back to Zodrow and Mieszkowski (1986), analyze tax competition when capital taxes are used to finance local public services provided to businesses, examining to which extent such services are provided efficiently, under-provided, or over-provided. In addition, several prominent observers have noted that “benefit-related” business taxation is desirable on efficiency and equity grounds and argued that such taxation should take the form of a production tax, such as an origin-based value added tax. We evaluate this contention in this paper, comparing within the context of a model of interjurisdictional competition the relative efficiency properties of business taxes that are assessed on production to those assessed on capital. We also provide a brief review of the literature on capital tax competition when public services are provided to businesses.

Suggested Citation

  • Elisabeth Gugl & George R. Zodrow, 2014. "The Efficiency of “Benefit-Related” Business Taxes," Working Papers 1406, Oxford University Centre for Business Taxation.
    • Handle: RePEc:btx:wpaper:1406
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    References listed on IDEAS

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    More about this item

    Keywords

    business public services; infrastructure; tax competition; capital taxes;
    All these keywords.

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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