Strategic delegation and international capital taxation
AbstractThe literature on tax competition generally concludes that international coordination of capital taxes among symmetric countries increases tax rates. This paper investigates whether this conclusion also holds in a political economy framework where taxes are set by elected policy makers. It shows that policy makers are fiscally more liberal than the average citizen if taxes are set non-cooperatively. However, fiscally more conservative policy makers are elected if taxes are set cooperatively. The introduction of tax coordination cannot remove the incentive to compete for foreign capital, but simply shifts it to the election stage. The paper proves that with standard specifications of the utility functions, coordination leads to lower tax rates than competition. --
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Bibliographic InfoPaper provided by ZEI - Center for European Integration Studies, University of Bonn in its series ZEI Working Papers with number B 22-2001.
Date of creation: 2001
Date of revision:
Tax competition; tax coordination; strategic delegation;
Find related papers by JEL classification:
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
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