The Resource Can fiscal equalisation mitigate tax competition? Ad valorem and residence-based taxation in a federation

Can fiscal equalisation mitigate tax competition? Ad valorem and residence-based taxation in a federation

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Can fiscal equalisation mitigate tax competition? Ad valorem and residence-based taxation in a federation
Title
Can fiscal equalisation mitigate tax competition? Ad valorem and residence-based taxation in a federation
Creator
Subject
Language
eng
Summary
In this paper, the author revisits the combined effect of horizontal and vertical tax externalities in a federal context, extending the theoretical framework of Keen and Kotsogiannis (Am Econ Rev 92(1):363-370, 2002) by allowing for ad valorem and residence-based taxation. When taxes are levied ad valorem rather than per-unit firstly, the author finds the interaction between both types of externalities is more ambiguous than commonly understood. As a result, and contrary to earlier findings, fiscal equalisation mechanisms such as the representative transfer system (RTS) fail to fully internalise the tax externalities. Given these limitations, the author derives the conditions under which a standard RTS will either: (1) at least nudge politicians in the right direction; (2) realise no welfare gains at all; (3) considerably overshoot the second-best efficiency mark causing welfare loss. Lastly, the author finds that when taxation is residence-based rather than source-based, a different kind of competition emerges where tax cuts are aimed at stimulating outward factor flows, rather than attracting inward flows
Citation source
In: International tax and public finance. - New York. - Vol. 24 (2017), no. 5 ; p. 817-853
http://library.link/vocab/creatorName
Sas, W
Geographic coverage
North America
Language note
English
http://library.link/vocab/subjectName
  • tax competition
  • ad valorem
  • residence principle of taxation
  • fiscal federalism
Label
Can fiscal equalisation mitigate tax competition? Ad valorem and residence-based taxation in a federation
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Publication
Label
Can fiscal equalisation mitigate tax competition? Ad valorem and residence-based taxation in a federation
Publication

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