The issue of capital tax competition in source-based capital taxes is viewed to be unproblematic if residence-based capital taxation exists. The sustainability, however, of residence-based capital taxation depends on the co-operation of source countries to assist in collecting tax revenues that benefit the residence country. We analyze conditions under which information about foreign savings are voluntarily exchanged. It turns out that information is voulntarily exchanged if the wage structure of the economy is not influenced by the size of the financial sector resulting in an efficient allocation with decentralized tax policies. In contrast, strategic incentives to withhold information may exist if the size of the financial sector has a positive impact on the wage structure of an economy.
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number
CESifo Working Paper No. 402.
Find related papers by JEL classification: F20 - International Economics - - International Factor Movements and International Business - - - General F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
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