The Taxation of Financial Capital Under Asymmetric Information and the Tax-Competition Paradox

31 Pages Posted: 10 Nov 2003

See all articles by Wolfgang Eggert

Wolfgang Eggert

University of Freiburg - Institute of Public Finance; CESifo (Center for Economic Studies and Ifo Institute)

Martin Kolmar

University of St. Gallen - Institute of Economy and the Environment (IWOe-HSG); CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2003

Abstract

This paper examines information sharing between governments in an optimal taxation framework. We present a taxonomy of alternative systems of international capital income taxation and characterize the choice of tax rates and information exchange. The model reproduces the conclusion of the previous literature that integration of international capital markets may lead to the under-provision of publicly provided goods. However, contrary to the existing literature under-provision occurs because of inefficiently coordinated expectations. We show that there exists a second equilibrium with an efficient level of public good provision and complete and voluntary information exchange between national tax authorities.

Keywords: tax competition, information exchange

JEL Classification: F42, F20, H21

Suggested Citation

Eggert, Wolfgang and Kolmar, Martin, The Taxation of Financial Capital Under Asymmetric Information and the Tax-Competition Paradox (November 2003). CESifo Working Paper Series No. 1074. Available at SSRN: https://ssrn.com/abstract=466082

Wolfgang Eggert (Contact Author)

University of Freiburg - Institute of Public Finance ( email )

D-79098 Freiburg
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Martin Kolmar

University of St. Gallen - Institute of Economy and the Environment (IWOe-HSG) ( email )

Varnbüelstrasse 14
CH-9000 St. Gallen
Switzerland
+41 (0)71 224 25 35 (Phone)
+41 (0)71 224 23 02 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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