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Pareto Efficiency in International Taxation

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  • Michael Keen
  • David E. Wildasin

Abstract

This paper addresses a key but neglected task in the theory of international taxation, lent increased urgency by growing awareness of the potential gains from tax coordination: the characterization of Pareto-efficient international tax regimes. It shows that the Diamond-Mirrlees theorem on the desirability of production efficiency, which underlies the key tenets of policy advice in international taxation ? the desirability of destination basis for commodity taxation, of the residence principle for capital income taxation, and of free trade ? is rendered inherently inapplicable to problems of international tax design by the distinctness of national budget constraints that is of the essence in thinking about international taxation. Conditions are established ? relating to the availability of explicit or implicit devices for reallocating tax revenues across countries ? under which production efficiency is nevertheless desirable, and a general characterization developed of the precise ways in which Pareto-efficient international taxation may require violation of established tenets.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 371.

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Date of creation: 2000
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Handle: RePEc:ces:ceswps:_371

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References

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  1. Huizinga, H.P. & Nielsen, S.B., 1995. "Capital income and profits taxation with foreign ownership of firms," Discussion Paper, Tilburg University, Center for Economic Research 1995-82, Tilburg University, Center for Economic Research.
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Cited by:
  1. Richter, Wolfram F., 2004. "Delaying integration of immigrant labor for the purpose of taxation," Journal of Urban Economics, Elsevier, vol. 55(3), pages 597-613, May.
  2. Jeremy Edwards & Ronnie Schöb, 2002. "Distortionary Domestic Taxation and Pareto-Efficient International Trade," CESifo Working Paper Series 635, CESifo Group Munich.
  3. Jeremy Edwards, 2003. "Gains from Trade in Tax Revenue and the Efficiency Case for Trade Taxes," CESifo Working Paper Series 897, CESifo Group Munich.
  4. Andreas Haufler & Michael Pflüger, 2003. "International Commodity Taxation under Monopolistic Competition," Discussion Papers of DIW Berlin 332, DIW Berlin, German Institute for Economic Research.
  5. Clinton R. Shiells, 2002. "Imperfect Competition and the Design of VAT Regimes," IMF Working Papers 02/235, International Monetary Fund.
  6. Haufler, Andreas & Schjelderup, Guttorm, 2004. "Tacit collusion and international commodity taxation," Journal of Public Economics, Elsevier, Elsevier, vol. 88(3-4), pages 577-600, March.
  7. Axel Dreher & Tim Krieger, 2005. "Do gasoline prices converge in a unified Europe with non-harmonized tax rates?," KOF Working papers, KOF Swiss Economic Institute, ETH Zurich 05-114, KOF Swiss Economic Institute, ETH Zurich.
  8. Dickescheid, Thomas, 2002. "Steuerwettbewerb und Direktinvestitionen," Beiträge zur Finanzwissenschaft, Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, edition 1, volume 16, number urn:isbn:9783161477348, July.
  9. Rosanne Altshuler, 2000. "Recent Developments in the Debate on Deferral," Departmental Working Papers, Rutgers University, Department of Economics 200013, Rutgers University, Department of Economics.
  10. Thomas Gaube, 2000. "Income taxation and production efficiency in a simple two-sector economy," Bonn Econ Discussion Papers, University of Bonn, Germany bgse14_2000, University of Bonn, Germany.
  11. Wolfgang Eggert & Martin Kolmar, 2002. "Residence-Based Capital Taxation in a Small Open Economy: Why Information is Voluntarily Exchanged and Why it is Not," International Tax and Public Finance, Springer, Springer, vol. 9(4), pages 465-482, August.

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