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Deutschland im Steuerwettbewerb (Germany Faces Tax Competition)

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  • Hans-Werner Sinn

Abstract

The 1997 German tax reform, which is of the tax-cut-cum-base-broadening type, has favorable welfare effects for Germany as a player in the international tax competition game, but it does so in part for paradox reasons. The reform favors investment projects whose returns are taxed according to the source principle and it hurts projects whose returns are taxed according to the residence principle. It is shown theoretically and empirically that both effects will narrow the existing gaps between the social return and the social opportunity cost of investment, thus increasing social welfare from a national point of view.

Suggested Citation

  • Hans-Werner Sinn, 1997. "Deutschland im Steuerwettbewerb (Germany Faces Tax Competition)," CESifo Working Paper Series 132, CESifo.
    • Handle: RePEc:ces:ceswps:_132
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    References listed on IDEAS

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    1. Sijbren Cnossen, 1996. "Company Taxes in the European Union: Criteria and Options for Reform," Fiscal Studies, Institute for Fiscal Studies, vol. 17(4), pages 67-97, November.
    2. Richter, Wolfram F., 1994. "The efficient allocation of local public factors in Tiebout's tradition," Regional Science and Urban Economics, Elsevier, vol. 24(3), pages 323-340, June.
    3. Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-774, September.
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    Cited by:

    1. Hans-Werner Sinn, 1999. "Inflation and Welfare: Comment on Robert Lucas," NBER Working Papers 6979, National Bureau of Economic Research, Inc.

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    Keywords

    tax reform; tax competition;

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