The object of this article is to show the interactions between fiscal and monetary politics in a harmonization prospect within an economic integration. It tackles the cooperative and competitive behaviors of governments when setting an harmonization process. Whether the residence or the source principle is adopted, the intergovernmental competition in fixing the tax rates on capital income will lead undoubtedly to an absurd situation in public finance. Rates resulting from such a competitive process (partial cooperation), cannot be maintained for a long time without involving serious problems in the competiting jurisdictions treasuries. It would be in the best interest of the countries to opt for a total cooperation which will enable them to maximize their receipts from this tax type, while satisfying simultaneously their objectives of fiscal neutrality within the integration and fiscal competitiveness on the international field. This being, whatever is the common principle of taxation, the associated rates should be correlated with the monetary politics adopted within the economic integration.
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Paper provided by CREDEN (Centre de Recherche en Economie et Droit de l'Energie), Faculty of Economics, University of Montpellier 1 in its series Cahiers du CREDEN (CREDEN Working Papers) with number
02.01.26.
Length: 26 pages Date of creation: 2002 Date of revision: Handle: RePEc:mop:credwp:02.01.26
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Find related papers by JEL classification: F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods