Pareto Efficiency in International Taxation

Michael Keen () and David Wildasin ()

Public Economics from EconWPA

Abstract: This paper addresses a key but neglected task in the theory of international taxation, lent increased urgency by growing awareness of the potential gains from tax coordination: the characterization of Pareto-efficient international tax regimes. It shows that the Diamond- Mirrlees theorem on the desirability of production efficiency, which underlies the key tenets of policy advice in international taxation--- the desirability of destination basis for commodity taxation, of the residence principle for capital income taxation, and of free trade---is rendered inherently inapplicable to problems of international tax design by the distinctness of national budget constraints that is of the essence in thinking about international taxation. Conditions are established---relating to the availability of explicit or implicit devices for reallocating tax revenues across countries---under which production efficiency is nevertheless desirable, and a general characterization developed of the precise ways in which Pareto efficient international taxation may require violation of established tenets.

Keywords: optimal; taxation; production; efficiency; international; taxation (search for similar items in EconPapers)
JEL-codes: D6 D7 H (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe
Date: 2001-12-10
Note: Type of Document - ; prepared on TeX; figures: request from author
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Related works:
Working Paper: Pareto Efficiency in International Taxation (2000)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwppe:0112003

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