Pareto Efficiency in International Taxation

22 Pages Posted: 20 Feb 2001

See all articles by David E. Wildasin

David E. Wildasin

University of Kentucky; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Institute for the Study of Labor (IZA); University of Oxford - Oxford University Centre for Business Taxation

Michael Keen

International Monetary Fund (IMF) - Fiscal Affairs Department; CESifo (Center for Economic Studies and Ifo Institute); Institute for Fiscal Studies (IFS)

Date Written: November 2000

Abstract

This paper addresses a key but neglected task in the theory of international taxation, lent increased urgency by growing awareness of the potential gains from tax coordination: the characterization of Pareto-efficient international tax regimes. It shows that the Diamond-Mirrlees theorem on the desirability of production efficiency, which underlies the key tenets of policy advice in international taxation - the desirability of destination basis for commodity taxation, of the residence principle for capital income taxation, and of free trade - is rendered inherently inapplicable to problems of international tax design by the distinctness of national budget constraints that is of the essence in thinking about international taxation. Conditions are established - relating to the availability of explicit or implicit devices for reallocating tax revenues across countries - under which production efficiency is nevertheless desirable, and a general characterization developed of the precise ways in which Pareto-efficient international taxation may require violation of established tenets.

JEL Classification: H0, F0

Suggested Citation

Wildasin, David E. and Keen, Michael, Pareto Efficiency in International Taxation (November 2000). CESifo Working Paper Series No. 371. Available at SSRN: https://ssrn.com/abstract=260928

David E. Wildasin (Contact Author)

University of Kentucky ( email )

Department of Economics
Lexington, KY 40546
United States

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

University of Oxford - Oxford University Centre for Business Taxation ( email )

Saïd Business School
Park End Street
Oxford, OX1 1HP
United Kingdom

Michael Keen

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Institute for Fiscal Studies (IFS)

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

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