International Tax Competition, Tax Cooperation and Capital Controls

University of Aarhus Dept. of Econ. WP 1997-9

26 Pages Posted: 22 Jul 1997

See all articles by Bo Sandemann Rasmussen

Bo Sandemann Rasmussen

Aarhus University - Department of Economics and Business Economics

Date Written: 1997

Abstract

Tax competition between independent authorities is known to lead to inefficient outcomes, implying there is scope for cooperation. In an international framework where the authorities are national governments, the undesirable features of tax competition may alternatively be mitigated by imposing restrictions on international capital flows. Using a two-country model it is shown that capital controls may fully remedy the adverse effects of tax competition and thereby render tax cooperation superfluous. In more general cases, however, capital controls have some undesirable side-effects, leaving room for cooperative actions. Moreover, the mere option of imposing capital controls may promote the implementation of tax cooperation.

JEL Classification: J41, H22

Suggested Citation

Rasmussen, Bo Sandemann, International Tax Competition, Tax Cooperation and Capital Controls (1997). University of Aarhus Dept. of Econ. WP 1997-9, Available at SSRN: https://ssrn.com/abstract=8744 or http://dx.doi.org/10.2139/ssrn.8744

Bo Sandemann Rasmussen (Contact Author)

Aarhus University - Department of Economics and Business Economics ( email )

Fuglesangs Allé 4
Aarhus V
Denmark
+45 8942 1133 (Phone)
+45 8613 6334 (Fax)

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