International Repercussions of Direct Taxes
نویسنده
چکیده
This paper analyzes the impact of tax competition between two countries of unequal per-capita capital endowments on tax rates and efficiency when distorting wage, residence-based and source-based capital taxes (or any combination of two instruments) are available for governments. The national welfare costs and benefits of tax rate variations are shown to be ambiguous in the asymmetric Nash equilibrium due to the existence of tax base and terms of trade effects. Moreover, numerical simulation results indicate that non-cooperative equilibria in Nash strategies are inefficient from an international perspective, even if residence-based capital taxes are in the set of tax instruments available to fiscal authorities. JEL Classification: H2, H4, H7 Address: Wolfgang Eggert, Department of Economics and Statistics, University of Konstanz, PO Box D 133, D–784 57 Konstanz, Germany. E-mail: Wolfgang.Eggert@uni–konstanz.de ∗Paper presented at the 1998 conference of the International Institute of Public Finance in Córdoba, Argentinia. I am grateful to seminar participants and to Harry Huizinga for helpful comments. All remaining shortcomings are mine.
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