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When ad valorem tax prevails in international tax competition

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  • Ogawa, Hikaru

Abstract

The studies on capital tax competition have assumed that the governments compete for mobile capital in unit tax, and this assumption is partially justified by Lockwood (2004), which proves that unit tax competition is always welfare superior to ad valorem tax competition within a framework of symmetric tax competition. This paper presents the reexamination of governments' choice on tax method in the framework of asymmetric tax competition. The results show that asymmetric countries do not compete in the same tax instrument, as assumed in the literature. The capital importing countries compete in ad valorem tax, while the capital exporting countries compete in unit tax.

Suggested Citation

  • Ogawa, Hikaru, 2016. "When ad valorem tax prevails in international tax competition," International Review of Economics & Finance, Elsevier, vol. 46(C), pages 1-9.
    • Handle: RePEc:eee:reveco:v:46:y:2016:i:c:p:1-9
    DOI: 10.1016/j.iref.2016.08.002
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    References listed on IDEAS

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    Cited by:

    1. Yuya Kikuchi & Toshiki Tamai, 2024. "Unemployment and endogenous choice on tax instruments in a tax competition model: unit tax versus ad valorem tax," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(2), pages 533-551, April.
    2. Haraguchi Junichi & Ogawa Hikaru, 2018. "Leadership in Tax Competition with Fiscal Equalization Transfers," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 18(3), pages 1-15, July.
    3. Shiou-Yen Chu & Tsaur-Chin Wu, 2023. "Ad valorem versus unit taxes on capital in a dynamic stochastic general equilibrium model," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(6), pages 1435-1456, December.
    4. Azacis, Helmuts & Collie, David R., 2021. "A General Model of International Tax Competition with Applications," Cardiff Economics Working Papers E2021/31, Cardiff University, Cardiff Business School, Economics Section.
    5. Mutsumi Matsumoto & Hikaru Ogawa, 2022. "Tax Competition and Efficient Fiscal Transfers under Capital and Labor Income Taxes," CIRJE F-Series CIRJE-F-1196, CIRJE, Faculty of Economics, University of Tokyo.
    6. Marija A. Troyanskaya, 2017. "Competition in Taxation and the Forms of its Implementation among the Subjects of the Russian Federation," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 3(3), pages 182-198.

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    More about this item

    Keywords

    Asymmetric tax competition; Unit tax; Ad valorem tax;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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