Optimal Capital Taxation Rates and Tax Competition in Open Economy

Séverine Menguy ()
Additional contact information
Séverine Menguy: Université Paris Descartes, Postal: Université Paris Descartes, Sorbonne Paris Cité, 12 rue de l’école de, médecine, 75270 PARIS CEDEX 06, France

Journal of Economic Integration, 2018, vol. 33, issue 4, 722-772

Abstract: The model presented in this paper provides accurate theoretical results regarding optimal taxation rates and fiscal externalities in an open economy. We show that for both capitalimporting and capital-exporting countries, capital taxation rates should increase with country size approximated by its capital stock. In parallel, for the smallest countries, the fiscal weight could be very high and strongly relies on the labor production factor. It is also demonstrated that the optimal capital taxation rate increases with the relative preference of the representative consumer for private consumption, in contrast to public consumption, as well as with the capital share in the production function. Furthermore, the presented model shows that the slope of the tax reaction function is positive as soon as the preference of the representative consumer for private goods consumption is sufficiently high.

Keywords: Tax competition; Capital importing country; Capital exporting country; Optimal capital taxation rate; Fiscal externalities (search for similar items in EconPapers)
JEL-codes: H21 H25 H87 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.e-jei.org Full text (application/pdf)

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:ris:integr:0757

Access Statistics for this article

Journal of Economic Integration is currently edited by Seongeun Kim

More articles in Journal of Economic Integration from Center for Economic Integration, Sejong University Contact information at EDIRC.
Bibliographic data for series maintained by Yunhoe Kim ().