Wolfgang Eggert

Company tax coordination cum tax rate competition in the European Union

This paper reviews the recent theoretical literature that analyzes the European Union’s policy to eliminate preferential corporate-tax regimes and the proposal to introduce a consolidated EU tax base with formula apportionment for the taxation of multinational firms. Since neither proposal includes a harmonization of corporate-tax rates, a core issue is how tax competition between member states will be affected by these partial coordination measures. The conclusions from our review are supportive of the EU’s ban on preferential tax regimes, but the economic incentive effects of a switch to formula apportionment are found to be ambiguous.

Symmetric Tax Competition under Formula Apportionment

This paper compares property taxation to a corporate income tax based on formula apportionment in a model where identical countries compete to attract capital. We find that if countries can pair a residence-based capital tax with a property tax (source tax on capital) the tax equilibrium is efficient. In contrast, the use of a 2-factor FA scheme based on sales and capital combined with a residence-based capital tax leads to an inefficient outcome. Copyright 2003 Blackwell Publishing Inc..

Fiscal Policy, Economic Integration and Unemployment

In this paper fiscal policy is examined for an open economy characterised by unemployment due to efficiency wages. We allow for capital and firm mobility in a model where the government chooses the level of wage, source-based capital and profit taxation. The taxing choices of governments are analyzed in scenarios which differ with respect to the constraints imposed on the set of available taxes and on the mobility of firms. As a general result, the welfare loss from labour market imperfections increases when tax bases become internationally mobile, which suggests an increasing relevance of domestic labour-market reforms when tax bases become global.

Residence-Based Capital Taxation in a Small Open Economy: Why Information is Voluntarily Exchanged and Why it is Not

The issue of capital tax competition is viewed to be unproblematic if residence-based capital-taxation exists. However, the sustainability of residence-based capital taxation depends on the exchange of information about foreign financial investments between tax authorities. This paper analyzes the incentives of tax authorities to voluntarily provide information. We show that voluntary information exchange is an equilibrium in a standard small-country model of tax competition, whereas it may not be an equilibrium when the size of the financial sector has a positive impact on the wage structure of an economy.

When do small countries win tax wars

This article analyzes the conditions under which the smaller of two otherwise iden- tical countries prefers the noncooperative Nash equilibrium to a situation of fully harmonized tax rates. A standard two-country model of capital tax competition is extended by allowing for transaction costs, additional countries, and additional tax instruments The effects of introducing either mobility costs or a wage tax instru ment are theoretically ambiguous because they lower both the costs and the benefits of noncooperation from the perspective of the small country. Numerical simulations indicate, however, that for a wide range of parameter values, all model extensions considered reduce the possibility that the small country gains from tax competition.

Capital tax competition with socially wasteful government consumption

Abstract Models of international tax competition typically suppose a benevolent government. This paper considers a government with self-interested consumption objectives in the presence of distorting taxes on capital investment, savings and labor income. In such a model, the effects of international tax coordination on the welfare of residents are ambiguous when a residence-based capital tax is not available. In contrast, government use of taxes is inefficient from the viewpoint of residents in the presence of residence-based capital taxation.

International Repercussions of Direct Taxes

Models of capital tax competition typically assume that countries have identical per-capita endowments. This paper presents a model with endogenous capital and labor supply where countries are unequal, and shows that countries do not necessarily engage in wasteful tax competition, in the sense that public goods are underprovided. We identify situations in which public goods are overprovided depending (i) on the set of distortionary taxes available for governments and (ii) on endowment differences. Numerical simulations indicate that public goods supply is inefficient in the asymmetric Nash equilibrium, even in the presence of residence-based capital taxation.

Is Tax Harmonization Useful

It is a widely acknowledged result of the literature on international tax competition that an inefficient provision of public goods can only be avoided, if taxes are sufficiently coordinated. In this paper we use a model where governments use commodity and factor taxes in the tax competition game. We show that governments will always choose a second-best efficient tax structure in the Nash equilibrium if they have access to a residence-based capital tax and either a destination-based commodity tax or a labor tax. Moreover, we show that tax competition need not foreclose third-best efficiency in a world with a restricted tax policy toolkit.

Ist eine Spekulationssteuer wünschenswert

Die deutsche Einkommensteuer orientiert sich an der Leitidee der umfassenden Einkommensteuer: Dies folgt sowohl aus der Ausgestaltung der Einkommensteuergesetze, die trotz vielfaltiger Reformschritte in § 2 EStG das Schanz/Haig/Simons-Prinzip (SHS) des steuerpflichtigen Gesamteinkommens stets beibehalten haben, als auch aus der Rechtsprechung des Bundesverfassungsgerichts, das in seinen Urteilsbegrundungen dem Prinzip der Besteuerung nach der Leistungsfahigkeit und des umfassenden Einkommens als Leistungsfahigkeitsindikator folgt.

Sanctions for repeat offenders: a question of wealth?

In a two-period standard law-enforcement model, individuals observe or break the law. In addition, individuals may offend accidentally. When sanctions are limited by individual wealth constraints, the government chooses appropriate sanctions for first and repeat offenders and the level of monitoring. We assume a welfare-oriented government and derive subgame-perfect equilibria for constant, increasing and decreasing sanctions depending on the individual wealth level.