Abstract

http://ssrn.com/abstract=953074
 
 

Citations (1)



 
 

Footnotes (130)



 


 



Taxes and Competitiveness


Michael S. Knoll


University of Pennsylvania Law School; University of Pennsylvania - Real Estate Department

December 14, 2006

U of Penn, Inst for Law & Econ Research Paper No. 06-28

Abstract:     
Around the world, the tax laws are shaped by concerns with competitiveness. This paper provides a general theory of how taxes impact competitiveness. As part of that theory, this paper also introduces the concept of tax-based competitiveness neutrality. A tax system is competitively neutral when taxes do not cause competitors to change their relative valuations of any investments. This paper then uses that theory to evaluate tax policy in two high profile and important areas.

The paper begins by describing two models of competitiveness, called the conduit or new money model and the investor or old money model. The central difference between the models is whether the competition is between conduit entities that must compete for funds or is between the ultimate investors themselves. When the competition is between conduits that raise the funds to invest, competitiveness neutrality requires that the tax cost of the investment be the same across entities. In contrast, when the competition is between investors who invest their own money, then neutrality does not require that the tax cost be equal across the investors. Instead, when investors are investing their own money, competitiveness neutrality requires only that tax incentives have the same dollar value for all competitors.

This paper then uses the theory of competitiveness neutrality to analyze two sets of laws that were heavily influenced by concerns with competitiveness. They are the unrelated business income tax (UBIT) and the tax treatment of cross-border transactions. In both areas, the failure to recognize the nature of the competition has caused policymakers and scholars to rely on the incorrect model in designing and evaluating tax policy.

Number of Pages in PDF File: 43

Keywords: international competitiveness, tax competition, foreign direct investment, international tax, international finance, tax incentives, cross-border transactions, foreign tax credits, capital export neutrality, capital import neutrality, capital ownership neutrality, mihir desai, james hines, ubit

JEL Classification: F30, K34

working papers series


Download This Paper

Date posted: December 22, 2006  

Suggested Citation

Knoll, Michael S., Taxes and Competitiveness (December 14, 2006). U of Penn, Inst for Law & Econ Research Paper No. 06-28. Available at SSRN: http://ssrn.com/abstract=953074 or http://dx.doi.org/10.2139/ssrn.953074

Contact Information

Michael S. Knoll (Contact Author)
University of Pennsylvania Law School ( email )
3501 Sansom Street
Philadelphia, PA 19104
United States
215-898-6190 (Phone)
215-573-2025 (Fax)
University of Pennsylvania - Real Estate Department ( email )
Philadelphia, PA 19104-6330
United States
Feedback to SSRN


Paper statistics
Abstract Views: 2,049
Downloads: 462
Download Rank: 33,972
Citations:  1
Footnotes:  130

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.359 seconds