Environmental Taxes, International Capital Mobility and Inefficient Tax Systems: Tax Burden vs. Tax Shifting

Ruud de Mooij and Lans Bovenberg

No 95-14, EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics

Abstract: This paper deals with the so-called 'double-dividend' of an environmental tax reform. We find that, in a model with only labor and a polluting input as factors of production, society faces a trade-off between internalizing environmental externalities and raising revenues in the least distortionary way. However, if capital enters the production structure, an ecological tax reform may render the tax structure more efficient from a non-environmental point of view, thereby raising not only environmental quality but also private incomes.

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Journal Article: Environmental Taxes, International Capital Mobility and Inefficient Tax Systems: Tax Burden vs. Tax Shifting (1998)
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