Capital Mobility and Tax Competition

Abstract

Introduction 2 International Capital Income Taxation and Tax Competition 2.1 How should foreign investment income be taxed? 2.2 Tax competition and double taxation agreements 2.3 The role of public goods provision 2.4 Tax competition with multinational firms and portfolio investment 2.5 Transfer prices and international income shifting 2.6 The financial structure of firms 3 Tax Coordination 3.1 Fiscal externalities and the welfare effects of tax coordination 3.2 An example: Tax competition and the underprovision of public goods 3.3 Residence-based capital income taxation 3.4 Distortionary labour taxes 3.5 Tax competition and optimal redistributive income taxation v

Capital Mobility and Capital Tax Competition

“…17 On the other hand, tax competition may restrain "Leviathan" tendencies for overconsumption of public services and encourage governments to use desirable user charges and benefit taxes (McLure, 1986;Edwards and Keen, 1996;Huber and Runkel, 2004). See Wilson (1999), Fuest, Huber and Mintz (2003), Wildasin and Wilson (2004) and Zodrow (2003) for discussions of the negative and positive aspects of tax competition. 18 See Zodrow (2007) for a recent review of these arguments.…”

Even small trade costs restore efficiency in tax competition

“…We consider the Zodrow and Mieszkowski (1986) framework in the version presented by Hoyt (1991), 5 and augment it by a transport sector. If transport costs are assumed to be zero, the model boils down to the original one.…”

“…Section 5 brie ‡y discusses the results and concludes. 1 Literally hundreds of papers have since then explored the robustness of the results to various changes in the modelling approach and a great variety of extensions, many of which are surveyed in Wilson and Wildasin (2004) and Fuest et al (2005). 2 Zodrow and Mieszkowski (1986) do not mention the product market explicitly, whereas Wilson (1986) assumes the existence of two private consumption goods, a local one and a national one, the latter of which is costlessly tradable across regions.…”

Mobile tax base as a global common

“…2 Any list of seminal contributions to this capital tax competition literature will notoriously be unfair to some authors, but should include Zodrow and Mieszkowski (1986), Wilson (1986), Wildasin (1988), Gordon (1986Gordon ( , 1992 and Sinn (1990). I gladly leave a possible blame of omissions to the excellent surveys by Wilson (1999), Wildasin and Wilson (2004), Fuest, Huber and Mintz (2005) and Sørensen (2007). 3 Tax base as a common pool resource has been considered in the context of vertical tax externalities, where a tax base in one location is subject to taxation by multiple, vertically ordered and independently acting …scal authorities, as in Keen (1998), Keen and Kotsogiannis (2002) and Wrede (1997Wrede ( , 2000.…”