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Information Sharing and Tax Competition Among Governments

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  • Philippe Bacchetta
  • Maria Paz Espinosa

Abstract

The residence-based principle has been proposed as a second-best measure to the full international coordination of capital tax policies. A basic requirement for this system to work is that tax authorities have full information about the foreign investments of their residents. The degree of information transmission among governments can be considered as a variable used strategically in the same way taxes are, however. We show that under some features of the tax system there will not be any information sharing, while there are institutional arrangements under which governments will transmit partial information for strategic purposes. We also show that full information sharing is not necessarily a Pareto optimum. Our conclusion is that the informational behaviour of governments is crucial and should be taken into account when designing the optimal international tax system.

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Bibliographic Info

Paper provided by European Science Foundation Network in Financial Markets, c/o C.E.P.R, 77 Bastwick Street, London EC1V 3PZ in its series CEPR Financial Markets Paper with number 0028.

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Date of creation: Feb 1993
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Availability: in print
Handle: RePEc:cpr:ceprfm:0028

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Related research

Keywords: International Tax Competition; Information Sharing; Optimal Monitoring; Exclusivity;

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References

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  1. Wildasin, D.E., 1987. "Nash equilibria in models of fiscal competition," CORE Discussion Papers 1987020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  17. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
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