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Capital Tax Competition with Three Tax Instruments
Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 118 (1998), Iss. 3 : pp. 361–387
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Eggert, Wolfgang
Abstract
The literature on capital tax competition among large countries identifies a fiscal environment in which positive source-based capital taxes are levied and public goods are provided efficiently. However, as this paper demonstrates in two additional scenarios, fiscal externalities are also offset when a government has access to taxes on the incomes of all factors subject to choice. In contrast to the existing literature, it is proved that governments of large countries choose not to tax capital at source if, and only if, a full set of taxes exists.