Distributional Consequences of Capital Tax Coordination

Wirtschafts Universitat Wien Discussion Paper No. 6

15 Pages Posted: 31 Jan 2007

See all articles by Martin Zagler

Martin Zagler

University of Piemonte Orientale - Facoltà di Economia; Vienna University of Economics and Business - Department of Economics

Date Written: 2005

Abstract

This paper has two ambitions. First, we review the economic literature on tax coordination. Second, we argue that the taxation of capital is not an issue of efficiency, but instead an issue of equity. In particular, capital tax coordination can alter the vertical distribution of income between the production factors capital and labour. Capital is in perfectly elastic supply in a small open economy. Therefore the tax incidence falls to the immobile factor, labour. By contrast, capital is in inelastic supply at the international level, and therefore the capital tax incidence falls completely on capital, without welfare losses of taxation.

Keywords: Tax competition, tax coordination, international taxation, distribution

JEL Classification: H87

Suggested Citation

Zagler, Martin, Distributional Consequences of Capital Tax Coordination (2005). Wirtschafts Universitat Wien Discussion Paper No. 6 , Available at SSRN: https://ssrn.com/abstract=960261 or http://dx.doi.org/10.2139/ssrn.960261

Martin Zagler (Contact Author)

University of Piemonte Orientale - Facoltà di Economia ( email )

Via Perrone, 18
Novara, 28100
Italy

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

Augasse 2-6
A-1090 Wien
Austria

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