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Incentives and Information Exchange in International Taxation

Author

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  • Michael Keen

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  • Jenny Ligthart

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Abstract

The exchange of taxpayer-specific information between national tax authorities has recently emerged as a key and controversial topic in international tax policy discussions, most notably with the OECD's harmful tax practices project and the EU's savings tax initiative. This paper analyzes the effects of information exchange and withholding taxes, recognizing that countries which agree to exchange information do not forfeit the ability to levy withholding taxes, and also focusing in particular on the effects of innovative revenue-sharing arrangements. Amongst the findings are that: (i) the transfer of withholding tax receipts to the residence country, as planned in the European Union, has no effect on equilibrium tax rates, but acts purely as a lump-sum transfer; (ii) in contrast, allocating some of the revenue from information exchange to the source country—counter to usual practice (though no less so than the EU agreement)—would have adverse strategic effects on total revenue; (iii) nevertheless, any withholding tax regime is Pareto dominated by information exchange combined with appropriate revenue sharing; and, in particular, (iv) sharing of the additional revenues raised from information provided, while efficiency-reducing, could be in the interests of large countries as a means of persuading small countries to provide that information voluntarily. Copyright Springer Science + Business Media, Inc. 2006

Suggested Citation

  • Michael Keen & Jenny Ligthart, 2006. "Incentives and Information Exchange in International Taxation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 13(2), pages 163-180, May.
  • Handle: RePEc:kap:itaxpf:v:13:y:2006:i:2:p:163-180 DOI: 10.1007/s10797-006-2316-z
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    References listed on IDEAS

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    Cited by:

    1. Peter Birch Sørensen, 2006. "Can Capital Income Taxes Survive? And Should They?," EPRU Working Paper Series 06-06, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    2. Ronald B. Davies & Pehr-Johan Norbäck & Ayça Tekin-Koru, 2009. "The Effect of Tax Treaties on Multinational Firms: New Evidence from Microdata," The World Economy, Wiley Blackwell, vol. 32(1), pages 77-110, January.
    3. Peter Birch Sørensen, 2006. "The Theory of Optimal Taxation: What is the Policy Relevance?," EPRU Working Paper Series 06-07, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    4. Katarzyna Bilicka & Clemens Fuest, 2014. "With which countries do tax havens share information?," International Tax and Public Finance, Springer;International Institute of Public Finance, pages 175-197.
    5. Nobuo Akai & Hikaru Ogawa & Yoshitomo Ogawa, 2010. "Endogenous Choice on Tax Instruments in a Tax Competition Model: Unit Tax versus Ad Valorem Tax," Discussion Papers in Economics and Business 10-01, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
    6. Giuseppe Carone & Jan Host Schmidt & Gaetan Nicodeme, 2007. "Tax revenues in the European Union: Recent trends and challenges ahead," European Economy - Economic Papers 2008 - 2015 280, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    7. repec:ieb:wpaper:2013/6/doc2015-7 is not listed on IDEAS
    8. Thomas Hemmelgarn & Gaëtan Nicodème, 2009. "Tax Co-ordination in Europe: Assessing the First Years of the EU-Savings Taxation Directive," Working Papers CEB 09-023.RS, ULB -- Universite Libre de Bruxelles.
    9. Huizinga, Harry & Nielsen, Søren Bo, 2008. "Must losing taxes on saving be harmful?," Journal of Public Economics, Elsevier, pages 1183-1192.
    10. 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.
    11. May Elsayyad, 2012. "Bargaining over Tax Information Exchange," Working Papers bargaining_over_tax_infor, Max Planck Institute for Tax Law and Public Finance.
    12. Katarzyna Bilicka & Clemens Fuest, 2012. "With which countries do tax havens share information?," RSCAS Working Papers 2012/06, European University Institute.
    13. Christian Keuschnigg & Martin Dietz, 2007. "A growth oriented dual income tax," International Tax and Public Finance, Springer;International Institute of Public Finance, pages 191-221.
    14. Filges, Trine & Larsen, Birthe, 2000. "Is Unemployment Always Higher when Insiders Decide?," CLS Working Papers 00-2, University of Aarhus, Aarhus School of Business, Centre for Labour Market and Social Research.
    15. Katarzyna Bilicka & Clemens Fuest, 2014. "With which countries do tax havens share information?," International Tax and Public Finance, Springer;International Institute of Public Finance, pages 175-197.
    16. Nobuo Akai & Hikaru Ogawa & Yoshitomo Ogawa, 2011. "Endogenous choice on tax instruments in a tax competition model: unit tax versus ad valorem tax," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(5), pages 495-506, October.
    17. Peter Birch Sørensen, 2006. "Can Capital Income Taxes Survive? And Should They?," CESifo Working Paper Series 1793, CESifo Group Munich.
    18. Thomas Hemmelgarn & Gaëtan Nicodème, 2009. "Tax Co-ordination in Europe: Assessing the First Years of the EU-Savings Taxation Directive," Working Papers CEB 09-023.RS, ULB -- Universite Libre de Bruxelles.
    19. Patrice Pierreti & Giuseppe Pulina & Skerdilajda Zanaj, 2016. "Tax havens compliance with international standards : a temporal perspective," CREA Discussion Paper Series 16-07, Center for Research in Economic Analysis, University of Luxembourg.
    20. 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

    Keywords

    international tax competition; international tax evasion; information exchange; withholding taxes;

    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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