Tax Incidence, Majority Voting and Capital Market Integration
نویسندگان
چکیده
We re-examine, from a political economy perspective, the standard view that higher capital mobility results in lower capital taxes a view, in fact, that is not confirmed by the available empirical evidence. We show that when a small economy is opened to capital mobility, the change of incidence of a tax on capital from capital owners to owners of the immobile factor may interact in such a way with political decision-making so as to cause a rise in the equilibrium tax. This can happen whether or not the fixed factor (labour) can be taxed. ∗We would like to thank David de Meza, Gareth Myles and seminar participants at CORE, Bristol, Warwick, Exeter and CRETE-2003 for comments. The usual disclaimer applies.
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