Distributional consequences of capital tax coordination

Publication: Working/Discussion PaperWU Working Paper

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Abstract

This paper has two ambitions. First, we review the economic literature on tax coordination. Second, we argue that the taxation of capital is not an issue of efficiency, but instead an issue of equity. In particular, capital tax coordination can alter the vertical distribution of income between the production factors capital and labour. Capital is in perfectly elastic supply in a small open economy. Therefore the tax incidence falls to the immobile factor, labour. By contrast, capital is in inelastic supply at the international level, and therefore the capital tax incidence falls completely on capital, without welfare losses of taxation. (author's abstract)
Original languageEnglish
Place of PublicationVienna
PublisherSFB International Tax Coordination, WU Vienna University of Economics and Business
Publication statusPublished - 2005

Publication series

NameDiscussion Papers SFB International Tax Coordination
No.6

WU Working Paper Series

  • Discussion Papers SFB International Tax Coordination

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