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Fiscal consequences of greater openness: from tax avoidance and tax arbitrage to revenue growth

Author

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  • Jouko Ylä-Liedenpohja

    (School of Management, University of Tampere)

Abstract

Revenue from corporation tax and taxes on capital income, net of revenue loss from deductibility of interest, as a percentage of the GDP has tripled in Finland over the past two decades. This is argued to result from greater openness of the economy as well as from simultaneous tax reforms towards neutrality of capital income taxation by combining tax-base broadening with tax-rate reductions. They implied improved efficiency of real investments, elimination of tax avoidance in entrepreneurial compensations and more truthful reporting of business profitability. The result was increased tax payments from both corporations and cash flows to the households. The reform cycle brought about new tax arbitrage practices, also analysed in the paper.

Suggested Citation

  • Jouko Ylä-Liedenpohja, 2008. "Fiscal consequences of greater openness: from tax avoidance and tax arbitrage to revenue growth," Working Papers 0864, Tampere University, Faculty of Management and Business, Economics.
    • Handle: RePEc:tam:wpaper:0864
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    File URL: http://urn.fi/urn:isbn:978-951-44-7244-2
    File Function: First version, 2008
    Download Restriction: no
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    Cited by:

    1. Anda Simona Rădulescu (Dîrvă) & Cristian Dîrvă, 2016. "The Specifics of Tax Arbitrage in The Reorganization of The European Companies Through Acquisitions, Mergers, Spin-Offs and Disinvestments," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 18(59), pages 145-162, March.

    More about this item

    Keywords

    tax base broadening; tax arbitrage; imputation system; dual income taxation;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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