Incentives and Information Exchange in International Taxation

Abstract

The exchange of taxpayer-specific information between national tax authorities has recently emerged as a key and controversial topic in international tax policy discussions, most notably with the OECD's harmful tax practices project and the EU's savings tax initiative. This paper analyses the effects of information exchange and withholding taxes, recognizing that countries which agree to exchange information do not forfeit the ability to levy withholding taxes, and also focusing in particular on the effects of innovative revenuesharing arrangements. Amongst the findings are that: (i) the transfer of withholding tax receipts to the residence country, as planned in the EU, has no effect on equilibrium tax rates, but acts purely as a lump sum transfer; (ii) in contrast, allocating some of the revenue from information exchange to the source country-counter to usual practice (though no less so than the EU agreement)-would have adverse strategic effects on total revenue; (iii) nevertheless, any withholding tax regime is Pareto dominated by information exchange combined with appropriate revenue sharing; and, in particular, (iv) sharing of the additional revenues raised from information provided, while efficiency-reducing, could be in the interests of large (high-tax) countries as a means of persuading small (low-tax) countries to provide that information voluntarily. JEL codes:H77; H87; F42

Must losing taxes on saving be harmful?

“…Depending on functional forms and in particular how the various semi-elasticities vary with tax rates, the picture could be more complicated than this in that the latter three regimes could be encountered more than once, as progresses. However, the saving-investment tax wedge perceived to maximize revenue in the non-cooperative regime with saving taxation will always lie in the second regime, 10 and the same therefore goes for some neighborhood around it (in particular to the left of it). In addition, there will always be a neighborhood of tax wedges to the right of =e v (where the saving tax part is only slightly bigger than zero) belonging to the third regime.…”

“…The elimination of the saving tax then reduces this excess taxation, and thus can be welfare-enhancing. 10 It is easily seen that the revenue maximizing tax wedge x s is given by 1=e u + 1=e v + p(1 )=(e u e v ) and satis…es (4.3).…”

Can Capital Income Taxes Survive? And Should They?

“…However, some authors have recently tried to identify circumstances in which it would indeed be in the mutual interest of source and residence countries to engage in systematic international information exchange (see, e.g., Bacchetta and Espinosa (2000), Eggert and Kolmar (2002), Huizinga and Nielsen (2003), and Keen and Ligthart (2006)). In particular, Keen and Ligthart (op.cit.…”

Globalisation, Tax Competition and the Harmonisation of Corporate Tax Rates in Europe: A Case of Killing the Patient to Cure the Disease?

“…By giving some of the additional earned tax revenue through information sharing, residence countries create an incentive for source countries to share their information. This regime is analysed in Keen and Ligthart (2006b), taking into account asymmetry in size, and it is concluded that it may be in the best interest of large countries to share some of their proceeds from information exchange with small countries to make sure that the latter gain from sharing information and will hence voluntarily exchange information.…”