The Taxation of Financial Capital under Asymmetric Information and the Tax-Competition Paradox

Wolfgang Eggert () and Martin Kolmar
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Wolfgang Eggert: University of Konstanz and CESifo
Martin Kolmar: University of G¨ottingen and CESifo

No 03-07, CoFE Discussion Paper from Center of Finance and Econometrics, University of Konstanz

Abstract: This paper examines information sharing between governments in an optimaltaxation framework. We present a taxonomy of alternative systems of international capital-income taxation and characterize the choice of tax rates and information exchange. The model reproduces the conclusion of the previous literature that integration of international capital markets may lead to the under-provision of publicly provided goods. However, different to the existing literature under-provision occurs because of inefficiently coordinated expectations. We show that there exists a second equilibrium with an efficient level of public-good provision and complete and voluntary information exchange between national tax authorities.

Keywords: tax competition; information exchange (search for similar items in EconPapers)
JEL-codes: F42 F20 H21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk and nep-pbe
Date: Written 2003-06
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