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Pareto Efficiency in International Taxation

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  • Michael Keen
  • David E. Wildasin

Abstract

This paper addresses a key but neglected task in the theory of international taxation, lent increased urgency by growing awareness of the potential gains from tax coordination: the characterization of Pareto-efficient international tax regimes. It shows that the Diamond-Mirrlees theorem on the desirability of production efficiency, which underlies the key tenets of policy advice in international taxation ? the desirability of destination basis for commodity taxation, of the residence principle for capital income taxation, and of free trade ? is rendered inherently inapplicable to problems of international tax design by the distinctness of national budget constraints that is of the essence in thinking about international taxation. Conditions are established ? relating to the availability of explicit or implicit devices for reallocating tax revenues across countries ? under which production efficiency is nevertheless desirable, and a general characterization developed of the precise ways in which Pareto-efficient international taxation may require violation of established tenets.

Suggested Citation

  • Michael Keen & David E. Wildasin, 2000. "Pareto Efficiency in International Taxation," CESifo Working Paper Series 371, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_371
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    References listed on IDEAS

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    Cited by:

    1. Dreher, Axel & Krieger, Tim, 2004. "Do gasoline prices converge in a unified Europe with non-harmonized tax rates?," Arbeitspapiere der Nordakademie 2004-04, Nordakademie - Hochschule der Wirtschaft.
    2. Thomas Gaube, 2000. "Income taxation and production efficiency in a simple two-sector economy," Bonn Econ Discussion Papers bgse14_2000, University of Bonn, Germany.
    3. Rosanne Altshuler, 2000. "Recent Developments in the Debate on Deferral," Departmental Working Papers 200013, Rutgers University, Department of Economics.
    4. Jeremy Edwards, 2003. "Gains from Trade in Tax Revenue and the Efficiency Case for Trade Taxes," CESifo Working Paper Series 897, CESifo Group Munich.
    5. Andreas Haufler & Michael Pflüger, 2004. "International Commodity Taxation under Monopolistic Competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(3), pages 445-470, August.
    6. Clinton R. Shiells, 2002. "Imperfect Competition and the Design of VAT Regimes; The Case of Energy Trade Between Russia and Ukraine," IMF Working Papers 02/235, International Monetary Fund.
    7. Jeremy Edwards & Ronnie Schöb, 2002. "Distortionary Domestic Taxation and Pareto-Efficient International Trade," CESifo Working Paper Series 635, CESifo Group Munich.
    8. Haufler, Andreas & Schjelderup, Guttorm, 2004. "Tacit collusion and international commodity taxation," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 577-600, March.
    9. Wolfgang Eggert & Martin Kolmar, 2002. "Residence-Based Capital Taxation in a Small Open Economy: Why Information is Voluntarily Exchanged and Why it is Not," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(4), pages 465-482, August.
    10. Richter, Wolfram F., 2004. "Delaying integration of immigrant labor for the purpose of taxation," Journal of Urban Economics, Elsevier, vol. 55(3), pages 597-613, May.
    11. Dickescheid, Thomas, 2002. "Steuerwettbewerb und Direktinvestitionen," Beiträge zur Finanzwissenschaft, Mohr Siebeck, Tübingen, edition 1, volume 16, number urn:isbn:9783161477348.

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    JEL classification:

    • F00 - International Economics - - General - - - General
    • H00 - Public Economics - - General - - - General

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