Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/208517 
Year of Publication: 
2005
Series/Report no.: 
Working paper No. 24-2005
Publisher: 
Copenhagen Business School (CBS), Department of Economics, Frederiksberg
Abstract: 
Europe has seen several proposals for tax coordination only in the area of capital income taxation, leaving countries free to adjust their labor taxes. The expectation is that higher capital income tax revenues would cause countries to reduce their labor taxes. This paper shows that such changes in the mix of capital and labor taxes brought on by capital income tax coordination can potentially be welfare reducing. This reflects that in a non-cooperative equilibrium capital income taxes may be more distorting from an international perspective than are labor income taxes. Simulations with a simple model calibrated to EU public finance data suggest that countries indeed lower their labor taxes in response to higher coordinated capital income taxes. The overall welfare effects of capital income tax coordination, however, are estimated to remain positive.
JEL: 
F20
H87
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper

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