Capital Tax Competition with Ine cient Government Spending
نویسنده
چکیده
Models of international tax competition typically assume the existence of a benevolent government. This paper presents a model which integrates the view of government as source of ine ciency with an analysis of distorting taxes on capital investment, savings and labor income in a common theoretical framework. The model yields the conclusion that the e ects of international tax coordination on the welfare of residents can be ambiguous because the costs of ine cient public good supply are lowered but wasteful government consumption is increased. However, the above nding is derived when the residence-based capital tax is not available. In contrast, government use of taxes clearly is ine cient from the viewpoint of residents in the presence of residence-based capital taxation. JEL Classi cation: H1, H2 Address: Wolfgang Eggert, Faculty of Economics and Statistics, University of Konstanz, PO Box D133, D{7 84 57 Konstanz, Germany. E-mail: Wolfgang.Eggert@uni{konstanz.de
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