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What do Theories of Tax Competition Predict for Capital Taxes in EU Countries? A Review of the Tax Competition Literature

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Abstract
The paper reviews the theoretical literature on capital tax competition relevant for capital taxation in the European Union. The basic tax competition model a la Zodrow and Mierzkowski (1986) is presented, and the arguments of the literature are subsequently integrated into the framework of the basic tax competition model. The review includes models of tax competition where countries are assumed large, asymmetric, when there are more than one tax instrument, where there are more than one tax base, when government is assumed self-serving, and where democratic elections and political equilibrium are allowed for. Moreover, the consequences of agglomeration economies for tax competition pressures are reviewed and incorporated into the standard tax competition model.

Suggested Citation

  • Signe Krogstrup, 2002. "What do Theories of Tax Competition Predict for Capital Taxes in EU Countries? A Review of the Tax Competition Literature," IHEID Working Papers 05-2002, Economics Section, The Graduate Institute of International Studies.
    • Handle: RePEc:gii:giihei:heiwp05-2002
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    References listed on IDEAS

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    Cited by:

    1. Sharma, Chanchal Kumar, 2010. "Beyond Gaps and Imbalances: Re-Structuring the Debate on Intergovernmental Fiscal Relations," MPRA Paper 32145, University Library of Munich, Germany.
    2. Franto Ricka, 2012. "The right-wing power of small countries," Working Papers 153, European Bank for Reconstruction and Development, Office of the Chief Economist.
    3. Stefan Gruber & Luigi Marattin, 2007. "No Taxation without Infrastructure," Working Paper series 11_07, Rimini Centre for Economic Analysis.
    4. repec:rim:rimwps:11-07 is not listed on IDEAS
    5. Dreher, Axel, 2006. "The influence of globalization on taxes and social policy: An empirical analysis for OECD countries," European Journal of Political Economy, Elsevier, vol. 22(1), pages 179-201, March.
    6. Baldwin, Richard & Forslid, Rikard, 2002. "Tax Competition and the Nature of Capital," CEPR Discussion Papers 3607, C.E.P.R. Discussion Papers.
    7. Alena Andrejovska & Veronika Pulikova, 2018. "Tax Revenues in the Context of Economic Determinants," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 14(1), pages 133-141.
    8. Olena V. Sokolovska, 2016. "Race to the bottom in international tax competition: some conceptual issues," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 2(2), pages 98-110.
    9. Sharma, Chanchal Kumar, 2007. "Rescuing the concept of vertical fiscal imbalance," MPRA Paper 39343, University Library of Munich, Germany, revised 2010.
    10. Libman, Alexander, 2005. "Взаимодействие Государственных И Частных Структур В Интеграционных Группировах: Теоретические Подходы И Опыт Снг [Interaction of Public and Private Actors in Regional Integration Groups - Theoretic," MPRA Paper 17044, University Library of Munich, Germany.

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    Keywords

    Tax Competition; Capital Taxation; Capital Mobility; European Integration; Agglomeration;
    All these keywords.

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