On the Scope for International Tax Cooperation: The Role of Capital Controls

Bo Rasmussen ()

Open Economies Review, 1999, vol. 10, issue 4, 395-414

Abstract: Tax competition between independent authorities is known to lead to inefficient outcomes, implying there is scope for cooperation. In an international framework where the authorities are national governments, the undesirable features of tax competition may alternatively be mitigated by imposing restrictions on international capital flows. Using a two-country model it is shown that capital controls may fully remedy the adverse effects of tax competition and thereby render tax cooperation superfluous. In more general cases, however, capital controls have some undesirable side-effects, leaving room for cooperative actions. Moreover, the mere option of imposing capital controls may promote the implementation of tax cooperation. Copyright Kluwer Academic Publishers 1999

Keywords: international tax competition; capital controls; tax cooperation; endowments; efficiency (search for similar items in EconPapers)
Date: 1999
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DOI: 10.1023/A:1008385731049

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