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Taxing Internationally Mobile Individuals—A Case of Countervailing Incentives

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  • Petter Osmundsen

Abstract

With internationally mobile labour and the abolition of national border controls, the individual may not only have private information about his skill level (adverse selection), but also about the length of time he resides and works in the home country (moral hazard) and about his foreign income. To reduce domestic income taxes, the individual has an incentive to understate his domestic utility and to exaggerate the utility he could obtain by spending additional time abroad. Under the reasonable assumption that these are positively correlated, incentives are countervailing. The optimal government policy may be implemented by a tax schedule containing negative, zero, and positive marginal income tax rates. Copyright Kluwer Academic Publishers 1999

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  • Petter Osmundsen, 1999. "Taxing Internationally Mobile Individuals—A Case of Countervailing Incentives," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(2), pages 149-164, May.
    • Handle: RePEc:kap:itaxpf:v:6:y:1999:i:2:p:149-164
    DOI: 10.1023/A:1008747630506
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    Cited by:

    1. Blumkin, Tomer & Sadka, Efraim & Shem-Tov, Yotam, 2011. "Labor Migration and the Case for Flat Tax," Foerder Institute for Economic Research Working Papers 275759, Tel-Aviv University > Foerder Institute for Economic Research.
    2. Alejandro Esteller & Amedeo Piolatto & Matthew D. Rablen, 2016. "Taxing high-income earners: tax avoidance and mobility," IFS Working Papers W16/07, Institute for Fiscal Studies.
    3. Etienne Lehmann & Laurent Simula & Alain Trannoy, 2014. "Tax me if you can! Optimal Nonlinear Income Tax Between Competing Governments," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(4), pages 1995-2030.
    4. Alan Krause, 2017. "On redistributive taxation under the threat of high-skill emigration," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 48(4), pages 845-856, April.
    5. Massimo Morelli & Huanxing Yang & Lixin Ye, 2012. "Competitive Nonlinear Taxation and Constitutional Choice," American Economic Journal: Microeconomics, American Economic Association, vol. 4(1), pages 142-175, February.
    6. Simula, Laurent & Trannoy, Alain, 2010. "Optimal income tax under the threat of migration by top-income earners," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 163-173, February.
    7. Laurent Simula & Alain Trannoy, 2012. "Shall we keep the highly skilled at home? The optimal income tax perspective," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 39(4), pages 751-782, October.
    8. Alan Krause, 2009. "Education and Taxation Policies in the Presence of Countervailing Incentives," Economica, London School of Economics and Political Science, vol. 76(302), pages 387-399, April.
    9. Bierbrauer, Felix & Brett, Craig & Weymark, John A., 2013. "Strategic nonlinear income tax competition with perfect labor mobility," Games and Economic Behavior, Elsevier, vol. 82(C), pages 292-311.
    10. Tomer Blumkin & Efraim Sadka & Yotam Shem-Tov, 2011. "Labor Migration and the Case for Flat Tax," CESifo Working Paper Series 3471, CESifo.
    11. Backlund, Kenneth & Sjögren, Tomas & Stage, Jesper, 2008. "Optimal Tax and Expenditure Policy in the Presence of Migration - Are Credit Restrictions Important?," Umeå Economic Studies 749, Umeå University, Department of Economics.

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    More about this item

    Keywords

    personal income taxation; countervailing incentives; geographical mobility;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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