Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/39543
Authors: 
Brückner, Matthias
Year of Publication: 
2001
Series/Report no.: 
ZEI working paper B 22-2001
Abstract: 
The literature on tax competition generally concludes that international coordination of capital taxes among symmetric countries increases tax rates. This paper investigates whether this conclusion also holds in a political economy framework where taxes are set by elected policy makers. It shows that policy makers are fiscally more liberal than the average citizen if taxes are set non-cooperatively. However, fiscally more conservative policy makers are elected if taxes are set cooperatively. The introduction of tax coordination cannot remove the incentive to compete for foreign capital, but simply shifts it to the election stage. The paper proves that with standard specifications of the utility functions, coordination leads to lower tax rates than competition.
Subjects: 
Tax competition
tax coordination
strategic delegation
JEL: 
H2
Document Type: 
Working Paper

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