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Alleged Tax Competition: The Mysterious Death of Bequest Taxes in Switzerland

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  • Brülhart, Marius
  • Parchet, Raphaël

Abstract

Interjurisdictional competition over mobile tax bases is an easily understood mechanism, but actual tax-base elasticities are difficult to estimate. Political pressure for reducing tax rates could therefore be based on erroneous estimates of the mobility of tax bases. We show that tax competition provided the most prominent argument in the policy debates leading to a succession of reforms of bequest taxation by Swiss cantons. Yet, we find only very weak statistical evidence of a relationship between tax burdens on bequests and the concerned tax base of wealthy elderly individuals. Moreover, bequest tax revenues are found to increase in bequest tax rates even in the long run, and we cannot reject the hypothesis that the elasticity of bequest tax revenue with respect to the average bequest tax rate is equal to one. The alleged pressures of tax competition did not seem in reality to exist.

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  • Brülhart, Marius & Parchet, Raphaël, 2011. "Alleged Tax Competition: The Mysterious Death of Bequest Taxes in Switzerland," CEPR Discussion Papers 8665, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8665
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    More about this item

    Keywords

    bequest taxation; fiscal federalism; tax competition;
    All these keywords.

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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