In an economy with identical infinitely-lived households that obtain utility from leisure as well as consumption, Chamley (1986) and Judd (1985) have shown that the optimal tax system to pay for an exogenous stream of government purchases involves a zero tax rate on capital in the long run, with tax revenue collected by a distortionary tax on labor income. Extending the results of Hall and Jorg...

We analytically and quantitatively examine a prominent justi…cation for capital income taxation: goods preferred by those with high ability ought to be taxed. We study an environment where commodity taxes are allowed to be nonlinear functions of income and consumption and …nd that, when ability is positively related to a preference for a good, optimal marginal commodity taxes on this good may b...

The international mobility of capital and the geographical dispersion of firms have clear advantages for the growth and modernisation of the region. They also create fundamental challenges for national tax authorities. Modern principles of capital taxation for the open developing economy indicate the need to find the correct balance between the encouragement of private investment and the financ...

According to the existing literature, capital taxes should not be imposed in the presence of optimal profit taxation in either unionised or competitive labour markets. We show that this conclusion does not hold for an economy with dual labour markets, where the competitive wage rate provides the outside option for unionised workers. Even with non-distortionary profit taxation it is optimal for ...

Although globalization in trade and in particular in financial markets forced national governments to adjust their capital income tax regimes to capital mobility and to strategic tax competition since the mid 1980s, there is evidence that national governments facing this increased pressure have an interest in taxing corporate income at the national level. This interest is also true for EU membe...

This paper considers a Ramsey model of linear capital and labor income taxation in which the government cannot commit ex-ante to a sequence of policies for the future. In this setup, if the government is more impatient than the government, the capital income tax will always be positive in steady state. Thus, impatience and lack of commitment are able to generate positive capital taxes in the lo...

We illustrate two differential oligopoly games using, respectively, the capital accumulation dynamics à la Solow-Nerlove-Arrow, and the capital accumulation dynamics à la Ramsey. In both settings, we evaluate the effects of (gross) profit taxation, proving that there exist tax rates yielding the same steady state social welfare as under social planning. Contrary to the static approach, our dyna...

Table 1. Financial Statement of Government X for year Y Revenue Levied through the Government’s Power Direct Taxation 21,260 Indirect Taxation 11,722 Compulsory fees, fines, penalties and levies 258 Sub Total 33,240 Earned through the Government’s Operations Investment Income 1,154 Unrealized gains(losses) arising from changes in the value of commercial forests 78 Other operational revenue 420 ...

This paper provides a new economic interpretation of the well-known dynamic optimal taxation principle that capital income should not be taxed in the steady state. We show that the result is related to the minimization of distortions at the intratemporal margin. When every factor of production can be taxed at the optimal rate, capital income should not be taxed in the steady state. But when the...

This paper investigates the interaction among a firm’s knowledge capital, growth opportunities, earning dynamics, and optimal leverage level. Under the corporate taxation and personal taxation framework, by assuming knowledge capital positively affects the realization of a firm’s growth opportunities, I find a positive relation between a firm’s optimal debt level and its knowledge capital. Mean...