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

24 Pages Posted: 3 Jun 2004

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)

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Abstract

Information sharing between governments is examined in an optimal-taxation framework. We introduce 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 found in earlier literature that integration of international caopital markets may lead to the under-provision of publicly provided goods. However, in contrast to previous results in the literature, under-provision occurs due to inefficiently coordinated expectations. We show that there exists a second equilibrium with an efficient level of public-good provision as well as complete and voluntary information exchange between national tax authorities.

Suggested Citation

Eggert, Wolfgang and Kolmar, Martin, The Taxation of Financial Capital Under Asymmetric Information and the Tax-Competition Paradox. Scandinavian Journal of Economics, Vol. 106, No. 1, pp. 83-106, March 2004. Available at SSRN: https://ssrn.com/abstract=537951

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 )

Varnb├╝elstrasse 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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