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Tax Competition and Tax Co-operation in the EU: The Case of Savings Taxation

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  • Katharina Holzinger
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    It took the EU 35 years to achieve a co-operative agreement on co-ordinated measures of savings taxation in a world with mobile capital. Political science has offered two explanations for this co-operation problem. First, co-operation is difficult as a result of the heterogeneity of governments' interests. Countries with a small domestic tax base favour tax competition, while countries with a large tax base prefer tax co-operation. Second, co-operation is difficult as a consequence of specific characteristics of the collective action problem involved. The actors face a prisoners' dilemma. Both explanations have their limits. The first approach is not very good in predicting actual policy preferences of governments, and the second approach dismisses the fact that the EU offers co-operative institutions that should be able to resolve a dilemma. The paper proposes a model which refines these explanations and fits better the positions of EU governments and their problems of finding an agreement.

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    File URL: http://www.eui.eu/ERPA/RSCAS/../../RSCAS/WP-Texts/03_07.pdf
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    File URL: http://www.eui.eu/ERPA/RSCAS/../../RSCAS/WP-Texts/03_07.pdf
    File Function: Full text
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    Paper provided by European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS) in its series EUI-RSCAS Working Papers with number 7.

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    Date of creation: 15 Aug 2003
    Handle: RePEc:erp:euirsc:p0076
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    1. Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, vol. 40(1), pages 113-134, January.
    2. Myles, Gareth D., 2000. "Wasteful government, tax evasion, and the provision of public goods," European Journal of Political Economy, Elsevier, vol. 16(1), pages 51-74, March.
    3. Sinn, Hans-Werner, 1997. "The selection principle and market failure in systems competition," Journal of Public Economics, Elsevier, vol. 66(2), pages 247-274, November.
    4. Bucovetsky, Sam & Wilson, John Douglas, 1991. "Tax competition with two tax instruments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 333-350, November.
    5. Michael P. Devereux & Rachel Griffith & Alexander Klemm, 2002. "Corporate income tax reforms and international tax competition," Economic Policy, CEPR;CES;MSH, vol. 17(35), pages 449-495, October.
    6. Dehejia, Vivek H. & Genschel, Philipp, 1998. "Tax competition in the European Union," MPIfG Discussion Paper 98/3, Max Planck Institute for the Study of Societies.
    7. Fuest, Clemens, 2000. "The Political Economy of Tax Coordination as a Bargaining Game between Bureaucrats and Politicians," Public Choice, Springer, vol. 103(3-4), pages 357-382, June.
    8. Michael Keen, 1993. "The welfare economics of tax co-ordination in the European Community : a survey," Fiscal Studies, Institute for Fiscal Studies, vol. 14(2), pages 15-36, February.
    9. Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, vol. 40(1), pages 113-134, January.
    10. Jack Hirshleifer, 1983. "From weakest-link to best-shot: The voluntary provision of public goods," Public Choice, Springer, vol. 41(3), pages 371-386, January.
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