Optimal cooperative taxation in the global economy

Pedro Teles and V. V. Chari

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: How should countries cooperate in setting fiscal and trade policies when government expenditures must be financed with distorting taxes? We show that even if countries cannot make explicit transfers to each other, every point on the Pareto frontier is production efficient, so that international trade and capital flows should be effectively free. Trade agreements must be supplemented with fiscal policy agreements. Residence-based income tax systems have advantages over source-based systems. Taxing all household asset income at a countryspecific uniform rate and setting the corporate income tax to zero yield efficient outcomes. Value-added taxes should be adjusted at the border.

JEL-codes: E60 E61 E62 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-int, nep-mac, nep-pbe and nep-pub
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https://www.bportugal.pt/sites/default/files/anexos/papers/wp202203.pdf

Related works:
Journal Article: Optimal Cooperative Taxation in the Global Economy (2023)
Working Paper: Optimal Cooperative Taxation in the Global Economy (2022)
Working Paper: Optimal Cooperative Taxation in the Global Economy (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ptu:wpaper:w202203

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