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Seignorage and Capital Taxation: Tax Competition Revisited

Author

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  • Miltiadis Makris

    (Department of Economics, University of Exeter, CMPO, University of Bristol and IMOP, Athens University of Economics and Business)

Abstract

We re-examine the standard view that capital taxes are too low when capital is mobile across tax jurisdictions. We do so by emphasising a previously neglected implication of non-cooperative capital tax setting in a world with national currencies. Namely, capital taxes also affect foreign seignorage. This horizontal externality may lead, ceteris paribus, to too high national capital taxes, and may more than o set the usual effects of tax competition. In this case, and contrary to conventional wisdom, national capital taxes will be too high. Conditions under which the latter is indeed the case are derived and discussed.

Suggested Citation

  • Miltiadis Makris, 2006. "Seignorage and Capital Taxation: Tax Competition Revisited," Discussion Papers 0603, Exeter University, Department of Economics.
  • Handle: RePEc:exe:wpaper:0603
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    File URL: http://people.exeter.ac.uk/RePEc/dpapers/DP0603.pdf
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    Keywords

    Tax Competition; Seignorage.;

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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