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Revenue Sharing and Information Exchange under Non-discriminatory Taxation

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  • Michael Keen
  • Jenny E. Ligthart

Abstract

The international exchange of tax information, and its merits compared to withholding taxation, has emerged as a central topic in international tax policy. We characterize and compare the outcomes that emerge, in a two-country world, with and without information exchange, under the assumption that countries are unable to tax residents and non-residents differentially. The analysis focuses on the role of asymmetries in country size (capturing a key feature of tax havens) and on the impact and potential desirability of schemes to share the revenue raised by withholding (as under the new EU savings tax arrangements) or (more innovatively) as a consequence of information exchange. We show that, irrespective of any difference in country size, it is in the interests of both countries, in terms of tax revenue, that all revenue collected from non-residents be transferred to the residence country-which would entail taking the EU practice even further from the norm, but is currently the standard in relation to information exchange. A withholding scheme with revenue fully reallocated in this way gives both countries more revenue than does information sharing, whatever the allocation under the latter. Copyright International Monetary Fund 2007. © Journal compilation the editors of the "Scandinavian Journal of Economics" 2007. .

Suggested Citation

  • Michael Keen & Jenny E. Ligthart, 2007. "Revenue Sharing and Information Exchange under Non-discriminatory Taxation," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(3), pages 487-504, September.
  • Handle: RePEc:bla:scandj:v:109:y:2007:i:3:p:487-504
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    References listed on IDEAS

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    1. Trandel, Gregory A., 1994. "Interstate commodity tax differentials and the distribution of residents," Journal of Public Economics, Elsevier, vol. 53(3), pages 435-457, March.
    2. Janeba, Eckhard & Smart, Michael, 2003. "Is Targeted Tax Competition Less Harmful Than Its Remedies?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(3), pages 259-280, May.
    3. Bacchetta, Philippe & Espinosa, Maria Paz, 1995. "Information sharing and tax competition among governments," Journal of International Economics, Elsevier, vol. 39(1-2), pages 103-121, August.
    4. Kanbur, Ravi & Keen, Michael, 1993. "Jeux Sans Frontieres: Tax Competition and Tax Coordination When Countries Differ in Size," American Economic Review, American Economic Association, vol. 83(4), pages 877-892, September.
    5. Huizinga, Harry & Nielsen, Soren Bo, 2003. "Withholding taxes or information exchange: the taxation of international interest flows," Journal of Public Economics, Elsevier, vol. 87(1), pages 39-72, January.
    6. Wolfgang Eggert & Martin Kolmar, "undated". "Information Sharing, Multiple Nash Equilibria, and Asymmetric Capital-Tax Competition," EPRU Working Paper Series 02-01, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    7. Andreas Haufler, 1996. "Tax coordination with different preferences for public goods: Conflict or harmony of interest?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(1), pages 5-28, January.
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    Cited by:

    1. PAOLINI, Dimitri & PISTONE, Pasquale & pulina, GIUSEPPE & ZAGLER, Martin, 2011. "Tax treaties and the allocation of taxing rights with developing countries," CORE Discussion Papers 2011042, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Thomas Hemmelgarn & Gaetan Nicodeme, 2009. "Tax Co-ordination in Europe: Assessing the First Years of the EU-Savings Taxation Directive," Taxation Papers 18, Directorate General Taxation and Customs Union, European Commission.
    3. K. Mccarthy & F. van Doorn & B. Unger, 2008. "Globalisation, Tax Competition and the Harmonisation of Corporate Tax Rates in Europe: A Case of Killing the Patient to Cure the Disease?," Working Papers 08-13, Utrecht School of Economics.
    4. Dimitri Paolini & Pasquale Pistone & Giuseppe Pulina & Martin Zagler, 2016. "Tax treaties with developing countries and the allocation of taxing rights," European Journal of Law and Economics, Springer, vol. 42(3), pages 383-404, December.
    5. Killian J. McCarthy & Frederik van Doorn & Brigitte Unger, 2011. "Tax Competition and the Harmonisation of Corporate Tax Rates in Europe," Chapters,in: International Handbook on the Economics of Integration, Volume II, chapter 20 Edward Elgar Publishing.
    6. Ligthart, Jenny E., 2007. "Information sharing for consumption tax purposes: An empirical analysis," Information Economics and Policy, Elsevier, vol. 19(1), pages 24-42, March.

    More about this item

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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