Conconi, Paola, Perroni, Carlo and Riezman, Raymond Glenn (2007) Is partial tax harmonization desirable? Working Paper. Coventry: University of Warwick, Department of Economics. (Warwick economic research papers.

Preview

PDF WRAP_Conconi_twerp_795.pdf - Requires a PDF viewer such as GSview, Xpdf or Adobe Acrobat Reader Download (222Kb)

Abstract

We consider a setting in which capital taxation is characterized by two distortions working in opposite directions. On one hand, governments engage in tax competition and are tempted to lower capital tax rates. On the other hand, they are unable to commit to future policies and, once capital has been installed, have incentives to increase taxes. In this setting, there exists a tax that optimally trades off the two distortions. We compare three possible tax harmonization scenarios: no tax harmonization (all countries set taxes unilaterally), global tax harmonization (all countries coordinate their capital taxes), and partial tax harmonization (only a subset of all countries coordinate capital taxes). We show that, if capital is sufficiently mobile, partial tax harmonization benefits all countries compared to both global and no harmonization.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HJ Public Finance
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Taxation -- Econometric models, Investments, Foreign -- Taxation, Capital movements -- Taxation, Stochastic analysis, Evolutionary economics
Series Name:	Warwick economic research papers
Publisher:	University of Warwick, Department of Economics
Place of Publication:	Coventry
Date:	March 2007
Number:	No.795
Number of Pages:	18
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
Version or Related Resource:	Conconi, P., Perroni, C. and Riezman, R. (2007). Is partial tax harmonization desirable?. Brussels: Universite Libre de Bruxelles. (ULB Institutional Repository 2013/98550). ; Conconi, P., Perroni, C. and Riezman, R. (2007). Is partial tax harmonization desirable?. [Coventry] : Centre for Economic Policy Research. (CEPR Discussion Papers no.5761). ; Conconi, P., Perroni, C. and Riezman, R. (2008). Is partial tax harmonization desirable? Journal of Public Economics, 92(1-2), pp. 254-267. http://wrap.warwick.ac.uk/id/eprint/30616
Related URLs:	Related item in WRAP
References:	Bacchetta, P. and M. P. Espinosa (1995). “Information Sharing and Tax Competition among Governments,” Journal of International Economics 39, 103-121. Bernhabib, J. and A. Rustichini (1997). “Optimal Taxes without Commitment,” Journal of Economic Theory 77, 231-259. Bond, S., L. Channels, M. Devereux, M. Grammie and E. Troup (2000). “Corporate Tax Harmonisation In Europe,” mimeo, Institute for Fiscal Studies. Brennan, G. and G.M. Buchanan (1980). The Power to Tax: Analytical Foundations of a Fiscal Constitution. Cambridge University Press, Cambridge. Chari, V. V., P. J. Kehoe and E. C. Prescott (1989). “Time Consistency and Policy,” in R. J. Barro (ed.), Modern Business Cycle Theory. Harvard University Press, Cambridge. Conconi, P. and C. Perroni (2006). “Do Credible Domestic Institutions Promote Credible International Agreements?”, CEPR Discussion Paper No. 5762. Devereux, M. P., B. Lockwood and M. Redoano (2005). “Do Countries Compete over Corporate Tax Rates?,” mimeo, University of Warwick. Edwards, J. and M. Keen (1996). “Tax Competition and the Leviathan,” European Economic Review 40, 113-134. European Commission (1998) “Conclusions of the ECOFIN Council Meeting on 1 December 1997 Concerning Taxation Policy,” Official Journal of the European Communities, C2, 6/1/98, pp. 1-6. European Commission (2001). “Towards an International Market without Tax Obstacles,” Communication from the European Commission COM(2001) 582 final. Fischer, S. (1980). “Dynamic Inconsistency, Cooperation, and the Benevolent Dissembling Government,” Journal of Economic Dynamics and Control 2, 93-107. Kehoe, P. (1989). “Policy Cooperation Among Benevolent Governments May Be Undesirable,” Review of Economic Studies 56, 289-296. Krugman, P. (1991). “The Move Toward Free Trade Zones,” in Policy Implications of Trade and Currency Zones, A Symposium Sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, (August), 7-42. Konrad, K. and G. Schjelderup (1999). “Fortress Building in Global Tax Competition,” Journal of Urban Economics 46, 156-167. Lucas, R. E. Jr. (1990). “Supply-side Economics: An Analytical Review,” Oxford Economic Papers 42, 293-316. Persson, T. and G. Tabellini (1992). “The Politics of 1992: Fiscal Policy and European Integration,” Review of Economic Studies 59, 689-701. Rogers, C. A. (1987). “Expenditure Taxes, Income Taxes, and Time Inconsistency,” Journal of Public Economics 32, 215-230. Slemrod, J., C. Hansen and R. Procter (1997). “The Seesaw Principle in International Tax Policy,” Journal of Public Economics 65, 163-176. Sørensen, P. B. (2000). “The Case for International Tax Co-ordination Reconsidered,” Economic Policy 31, 431-472. Stiglitz, J. E. (1987). “Pareto Efficient and Optimal Taxation and the New New Welfare Economics,” in A. J. Auerbach and M. Feldstein Handbook of Public Economics 2, 991-1042. Wilson, J. (2004).“Tax Competition: Bane or Boon?,” Journal of Public Economics 88, 1065-1091.
URI:	http://wrap.warwick.ac.uk/id/eprint/1412

Request changes to a record

Actions (login required)

View Item