International Tax Competition and Gains from Tax Harmonization
AbstractIn a world economy there are two types of distortions which can be caused by capital income taxation in addition to the standard closed-economy wedge between the consumer-saver marginal intertemporal rate of substitution and the producer-investor marginal productivity of capital: (i)international differences in intertemporal marginal rates of substitution, implying an inefficient allocation of world savings across countries; and (ii) international differences in the marginal productivity of capital, implying an inefficient allocation of world investment across countries. The paper focuses on the structure of taxation for countries which are engaged in tax competition and on potential gains from s tax harmonization. We show that if the competing countries are sufficiently coordinated with the rest of the world then tax competition leads each country to apply the residence principle of taxation and there are no gains from tax harmonization. If, however there is not sufficient coordination,tax competition leads to low capital income taxes and the tax burden falls on the internationally immobile factors. The outcome is nevertheless still efficient relative to the available constrained set of tax instruments.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3152.
Date of creation: Oct 1989
Date of revision:
Publication status: published as Economics Letters, Vol. 37, pp. 69-76, (August 1991).
Note: ITI PE EFG IFM
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- Razin, Assaf & Sadka, Efraim, 1991. "International tax competition and gains from tax harmonization," Economics Letters, Elsevier, vol. 37(1), pages 69-76, September.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production: I--Production Efficiency," American Economic Review, American Economic Association, vol. 61(1), pages 8-27, March.
- Assaf Razin & Efraim Sadka, 1989. "Integration of the International Capital Markets: The Size of Government and Tax Coordination," NBER Working Papers 2863, National Bureau of Economic Research, Inc.
- Dixit, Avinash, 1985. "Tax policy in open economies," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 6, pages 313-374 Elsevier.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.