Is Neoliberalism Still Spreading? The Impact of International Cooperation on Capital Taxation

Lukas Hakelberg and Thomas Rixen ()

No tvneu, SocArXiv from Center for Open Science

Abstract: The downward trend in capital taxes since the 1980s has recently reversed for personal capital income. At the same time, it continued for corporate profits. Why have these tax rates di-verged after a long period of parallel decline? We argue that the answer lies in different levels of change in the fights against tax evasion and tax avoidance. The fight against evasion by households progressed significantly since 2009, culminating in the multilateral adoption of automatic exchange of information (AEI). In contrast, international efforts against base ero-sion and profit shifting (BEPS) failed to curb tax avoidance by corporations. We theorize that international cooperation is an intervening variable, countering the negative impact of tax competition on capital taxation by reducing the risk of capital flight. Under such conditions, domestic political pressures in favor of higher capital taxes can unfold. We confirm our argu-ment in a difference-in-difference analysis and through additional tests with data for up to 35 OECD countries from 2000-2017. Our central estimate suggests that the average tax rate on dividends in 2017 is 4.5 percentage points higher than it would have been absent international tax cooperation.

Date: 2020-04-25
New Economics Papers: this item is included in nep-acc, nep-iue and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://osf.io/download/5ea0b35635f4bf00a91f8f51/

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:tvneu

DOI: 10.31219/osf.io/tvneu

Access Statistics for this paper

More papers in SocArXiv from Center for Open Science
Bibliographic data for series maintained by OSF ().