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What do Theories of Tax Competition Predict for Capital Taxes in EU Countries? A Review of the Tax Competition Literature

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Abstract

The paper reviews the theoretical literature on capital tax competition relevant for capital taxation in the European Union. The basic tax competition model a la Zodrow and Mierzkowski (1986) is presented, and the arguments of the literature are subsequently integrated into the framework of the basic tax competition model. The review includes models of tax competition where countries are assumed large, asymmetric, when there are more than one tax instrument, where there are more than one tax base, when government is assumed self-serving, and where democratic elections and political equilibrium are allowed for. Moreover, the consequences of agglomeration economies for tax competition pressures are reviewed and incorporated into the standard tax competition model.

Suggested Citation

  • Signe Krogstrup, 2002. "What do Theories of Tax Competition Predict for Capital Taxes in EU Countries? A Review of the Tax Competition Literature," IHEID Working Papers 05-2002, Economics Section, The Graduate Institute of International Studies.
  • Handle: RePEc:gii:giihei:heiwp05-2002
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    1. Wilson, John Douglas, 1991. "Tax competition with interregional differences in factor endowments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 423-451, November.
    2. Isabelle Joumard, 2003. "Tax systems in European Union countries," OECD Economic Studies, OECD Publishing, vol. 2002(1), pages 91-151.
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    6. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
    7. Ludema, Rodney D. & Wooton, Ian, 2000. "Economic geography and the fiscal effects of regional integration," Journal of International Economics, Elsevier, vol. 52(2), pages 331-357, December.
    8. Razin, Assaf & Sadka, Efraim, 1991. "International tax competition and gains from tax harmonization," Economics Letters, Elsevier, vol. 37(1), pages 69-76, September.
    9. Kind, Hans Jarle & Knarvik, Karen Helene Midelfart & Schjelderup, Guttorm, 2000. "Competing for capital in a 'lumpy' world," Journal of Public Economics, Elsevier, vol. 78(3), pages 253-274, November.
    10. Wildasin, David E., 1988. "Nash equilibria in models of fiscal competition," Journal of Public Economics, Elsevier, vol. 35(2), pages 229-240, March.
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    13. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(2), pages 269-304, June.
    14. Kanbur, Ravi & Keen, Michael, 1991. "Tax competition and tax coordination : when countries differ in size," Policy Research Working Paper Series 738, The World Bank.
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    16. Zodrow, George R. & Mieszkowski, Peter, 1986. "Pigou, Tiebout, property taxation, and the underprovision of local public goods," Journal of Urban Economics, Elsevier, vol. 19(3), pages 356-370, May.
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    18. Ottaviano, Gianmarco & van Ypersele, Tanguy, 2002. "Market Access and Tax Competition," CEPR Discussion Papers 3638, C.E.P.R. Discussion Papers.
    19. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
    20. Krogstrup, Signe, 2002. "Public debt asymmetries: the effect on taxes and spending in the European Union," Working Paper Series 0162, European Central Bank.
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    Cited by:

    1. Sharma, Chanchal Kumar, 2010. "Beyond Gaps and Imbalances: Re-Structuring the Debate on Intergovernmental Fiscal Relations," MPRA Paper 32145, University Library of Munich, Germany.
    2. Stefan Gruber & Luigi Marattin, 2007. "No Taxation without Infrastructure," Working Paper series 11_07, Rimini Centre for Economic Analysis.
    3. repec:rim:rimwps:11-07 is not listed on IDEAS
    4. Baldwin, Richard & Forslid, Rikard, 2002. "Tax Competition and the Nature of Capital," CEPR Discussion Papers 3607, C.E.P.R. Discussion Papers.
    5. repec:mje:mjejnl:v:14:y:2018:i:1:p:133-141 is not listed on IDEAS
    6. Agnès Bénassy-Quéré & Nicolas Gobalraja & Alain Trannoy, 2007. "Tax and public input competition," Economic Policy, CEPR;CES;MSH, vol. 22, pages 385-430, April.
    7. Sharma, Chanchal Kumar, 2007. "Rescuing the concept of vertical fiscal imbalance," MPRA Paper 39343, University Library of Munich, Germany, revised 2010.
    8. Libman, Alexander, 2005. "Взаимодействие Государственных И Частных Структур В Интеграционных Группировах: Теоретические Подходы И Опыт Снг
      [Interaction of Public and Private Actors in Regional Integration Groups - Theoretic
      ," MPRA Paper 17044, University Library of Munich, Germany.

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    Keywords

    Tax Competition; Capital Taxation; Capital Mobility; European Integration; Agglomeration;

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