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Capital Flows, Information Sharing and Optimal Capital Taxation

Author

Listed:
  • Delphine Beraud

    (Université de Lille, Sciences et Technologies)

  • Emmanuelle Taugourdeau

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

When agents can conceal the investments they have made in other countries, they can take advantage of tax evasion. This paper deals with this problem by answering the following question: is it optimal for countries to share information on investments? We have developped a two-period and two-country model where governments are benevolent. In a non-cooperative game, we have studied the opportunity for a country to display information on the incomes foreign agents have earned to other governments. We have also determined the optimal capital tax rates chosen by governments following two decision sequences. When a government chooses the tax rates and the level of information transmitted to the other government at the same time, the optimal solution is no information sharing. When the choice of information sharing occurs before the choice of tax rates, the optimal level of information sharing depends on the tax principle applied by the governments. When a uniform tax system is applied (all tax rates are identical), partial information sharing represents the optimal solution to the problem.

Suggested Citation

  • Delphine Beraud & Emmanuelle Taugourdeau, 2008. "Capital Flows, Information Sharing and Optimal Capital Taxation," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00620930, HAL.
    • Handle: RePEc:hal:cesptp:hal-00620930
    as

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