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Tax incidence, majority voting and capital market integration

  • Lockwood, Ben
  • Makris, Miltiadis

We re-examine, from a political economy perspective, the standard view that higher capital mobility results in lower capital taxes - a view, in fact, that is not confirmed by the available empirical evidence. We show that when a small economy is opened to capital mobility, the change of incidence of a tax on capital - from capital owners to owners of the immobile factor - may interact in such a way with political decision-making so as to cause a rise in the equilibrium tax. This can happen whether or not the fixed factor (labour) can be taxed.

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File URL: http://www.sciencedirect.com/science/article/B6V76-4HGM73R-1/2/5b18a7d2130ae53e8382e9684f5fe36d
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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 90 (2006)
Issue (Month): 6-7 (August)
Pages: 1007-1025

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Handle: RePEc:eee:pubeco:v:90:y:2006:i:6-7:p:1007-1025
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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