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Strategic delegation and international capital taxation

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  • Brückner, Matthias

Abstract

The literature on tax competition generally concludes that international coordination of capital taxes among symmetric countries increases tax rates. This paper investigates whether this conclusion also holds in a political economy framework where taxes are set by elected policy makers. It shows that policy makers are fiscally more liberal than the average citizen if taxes are set non-cooperatively. However, fiscally more conservative policy makers are elected if taxes are set cooperatively. The introduction of tax coordination cannot remove the incentive to compete for foreign capital, but simply shifts it to the election stage. The paper proves that with standard specifications of the utility functions, coordination leads to lower tax rates than competition.

Suggested Citation

  • Brückner, Matthias, 2001. "Strategic delegation and international capital taxation," ZEI Working Papers B 22-2001, University of Bonn, ZEI - Center for European Integration Studies.
    • Handle: RePEc:zbw:zeiwps:b222001
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    References listed on IDEAS

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    12. Huber, Bernd, 1999. "Can Tax Coordination Work?," Munich Reprints in Economics 19403, University of Munich, Department of Economics.
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    Cited by:

    1. Rupayan Pal & Ajay Sharma, 2011. "Political competition and leadership in tax competition," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2011-024, Indira Gandhi Institute of Development Research, Mumbai, India.

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    More about this item

    Keywords

    Tax competition; tax coordination; strategic delegation;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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