escaping the polluter pays trap financing wastewater treatment on the tijuana san diego border abstract building and operating infrastructure to address transboundary environmental hazards requires dividing the cost of pollution prevention between bordering states when cost burden questions arise the solution often suggested is the polluter pays principle ppp however when political and economic relations between neighboring countries are asymmetrical other cost burden principles are often adopted given the discrepancy between theory and practice the aim of this study is to identify some of the available cost burden principles and to examine when they might replace the ppp the pollution prevention regime along the san diego tijuana border is used as a case study it was found that under asymmetrical relations there are several competing cost burden principles some principles are adopted since they are perceived by some to be fair while others are adopted since they provide effective wastewater treatment the ones that were found effective are those that offset to some degree existing asymmetries this explains why the ppp was replaced in the san diego tijuana case with other cost burden principles that better offset the asymmetries and thus they provided a more effective wastewater treatment than the ppp

ranking disclosure policies in all pay auctions in this paper we study information disclosure policies in all pay auctions with incomplete information two symmetric players have either high or low private value the contest organizer observes players values ex post and can commit ex ante to four different symmetric information policies exhaustively she can fully disclose or conceal the players types and she can disclose their types if and only if when both are high or if and only if when both are low we characterize the unique equilibriums and completely rank the four policies by various criteria we find the full concealment policy extracts highest aggregate expected effort followed by the policy of disclosing types if and only if when both are high the policy of disclosing types if and only if when both are low induces least aggregate expected effort players enjoy highest expected payoffs under the policy of disclosing types if and only if when both are low the other three policies yield the same expected payoffs to players in terms of prize allocation efficiency the full concealment policy is ranked highest and the full disclosure policy is ranked lowest in between the other two policies rankings depend on the probability of high type jel c72 d44 d82 d83 j48

dividend taxes corporate investment and q abstract taxes on corporate distributions have traditionally been regarded as a double tax on corporate income this view implies that while the total effective tax rate on corporate source income affects real economic decisions the distribution of this tax burden between the shareholders and the corporation is irrelevant recent research has suggested an alternative to this traditional view one explanation of why firms in the united states pay dividends in spite of the heavy tax liabilities associated with this form of distribution is that the stock market capitalizes the tax payments associated with corporate distributions this capitalization leaves investors indifferent at the margin between a corporation s decision to pay out dividends or to retain earnings this alternative view holds that while changes in the dividend tax rate will affect shareholder wealth they will have no impact on corporate investment decisions this paper develops econometric tests which distinguish between these two views of dividend taxation by extending tobin s q theory of investment to incorporate taxes at both the corporate and personal levels the implications of each view for corporate investment decisions can be derived the competing views may be tested by comparing the performance of investment equations estimated under each theory s predictions british time series data are particularly appropriate for testing hypotheses about dividend taxes because of the substantial postwar variation in effective tax rates on corporate distributions the econometric results suggest that dividend taxes have important effects on investment decisions

monotone equilibrium of two bidder all pay auctions redux abstract in this paper we revisit the two bidder asymmetric all pay auction of amann and leininger 1996 by allowing interdependent values and correlated signals both values and signals are distributed on continuous supports we provide conditions for the existence and uniqueness of a monotone pure strategy equilibrium mpse and constructively characterize the mpse when it exists we find that given the marginal distributions of the signals the equilibrium allocation is solely determined by how bidders values depend on their signals in particular the equilibrium allocation does not depend on how bidders signals are correlated

taxation of outbound direct investment economic principles and tax policy considerations this paper reviews economic principles for optimality of the taxation of international profit from both a global and national perspective it argues that for traditional systems based on the residence of the investor or the source of the income nothing less than full harmonisation across countries can achieve global optimality the conditions for national optimality are more difficult to identify but are most likely to imply source based taxation however source based taxation requires an allocation of the profits of multinational companies to individual jurisdictions this is not only very difficult in practice but in some cases is without any conceptual foundation the taxation of interest income on a residence basis is also hard to justify if the aim of the tax system is to tax only the income arising from economic activity in a given country

two bidder all pay auctions with interdependent valuations including the highly competitive case abstract we analyze symmetric two bidder all pay auctions with interdependent valuations and discrete type spaces relaxing previous restrictions on the distribution of types and the valuation structure we present a construction that characterizes all symmetric equilibria we show how the search problem this construction faces can be complex in equilibrium randomization can take place over disjoint intervals of bids equilibrium supports can have a rich structure and non monotonicity of the equilibrium may result in a positive probability of allocative inefficiency when the value of the prize is not common particular attention is paid to the case in which an increase in a bidder s posterior expected value of winning the auction is likely to be accompanied by a corresponding increase for the other bidder such environments are highly competitive in the sense that the bidder s higher valuation also signals that the other bidder has an incentive to bid aggressively

privately informed seekers of an uncertain rent two departures from antecedent rent seeking models are invoked a rent of unknown size is sought and rent seekers obtain private imperfect estimates of this size a symmetric equilibrium for a fixed number of rent seekers is characterized and shown to underdissipate the rent then a model of the decision to obtain private information and participate in the rent seeking contest is built the symmetric equilibrium participation probability equates expected profit to participation costs a simple formula for underdissipation results dissipation is incomplete pre cisely by the expected aggregate participation costs if an award mechanism can attain a lower level of dissipation for a fixed number of seekers then it will raise the endogenous probability of partici pation and as a result will dissipate less rent in the equilibrium with an endogenous number of seekers

optimality properties of alternative systems of taxation of foreign capital income foreign source capital income taxes are examined from the point of view of optimal taxation in the framework of a simple economy with international real capital flows a taxonomy of alternative systems of such taxation is first presented showing how crediting and other tax parameters induce what are called source based residence based and related systems next tax rates are determined that are optimal from a single country s point of view given those of the others the achievability of these rates under the various systems is analyzed finally tax rates that are optimal from an international point of view are considered again achievability of an international optimum under the various systems is considered leading to the main conclusions that i a pure residence based system in all countries can achieve an international fiscal optimum ii it cannot however be sustained as an equilibrium

public good differentiation and the intensity of tax competition we show that in a setting where tax competition promotes efficiency variation in the extent to which firms can use public goods to reduce costs brings about a reduction in the intensity of tax competition this in turn brings about a loss of efficiency in this environment a minimum tax counters the reduction in the intensity of tax competition thereby enhancing efficiency split the difference tax harmonization also potentially enhances efficiency but would not be agreed upon by governments because it lowers the payoff to at least one of them this paper also presents an explanation for how traditionally high tax countries have continued to set taxes at a relatively high rate even as markets have become more integrated

the incidence and allocation effects of a tax on corporate distributions abstract to study the effects of double taxation first at the corporation level then at the shareholder level this paper analyzes a model with a tax on all corporate distributions to equity owners and no other taxes contrary to the common view the tax is shown to have no subtitution effect and in particular no effect on the corporate choice between debt and equity via retained earnings finance the analysis opens to question certain arguments commonly used to support integration of corporation and individual income taxes via dividend relief

fiscal policy in a simple two country dynamic model abstract this paper analyzes the national and international effects of labor and capital income taxes in a two country infinite horizon perfect foresight neoclassical model with endogenous labor supply and capital accumulation two polar regimes of capital income taxation are considered the source based and the residence based the qualitative effects of labor income taxes are shown to be independent of the taxation regime whereas the effects of capital income taxes are not

private versus complete information in auctions abstract we show that in several but not all standard auctions i private independent values and ii complete information are payoff equivalent the first price auction generates the same revenue under i and ii the all pay auction has lower revenue under ii

strategic behaviour and the rules for international taxation of capital this paper examines the welfare of a capital exporting or source country and a capital importing or host country under tax credit and tax deduction systems for the international taxation of capital because the two tax systems may create quite different strategic incentives for the countries the authors compare the equilibria in the tax setting game played by the two countries under each system they find that the tax credits system introduces an antitrade bias into the equilibrium contrary to initial impressions and that both capital exporting and capital importing countries will prefer the tax deductions scheme to tax credits copyright 1989 by royal economic society

asymmetric all pay auctions with incomplete information the two player case abstract we prove existence and uniqueness of bayesian equilibrium for a class of generally asymmetric all pay auctions with incomplete information due to its importance in applications some prominence is given to the first price all pay auction for which a detailed characterization of equilibrium and an approximation to equilibrium of its well studied complete information version are supplied furthermore we relate our uniqueness result to the well known multiplicity of equilibria in the war of attrition second price all pay auction which emerges as a limit point of the class of two player auction games considered journalof economic literature classification numbers d44 c62 c72

asymmetric contests with conditional investments rent seeking scenarios competitions for promotions and research and development r d races are examples of competitions in which participants expend resources regardless of whether they win or lose although similar in their all pay feature such competitions often differ in important dimensions these include the type of technologies employed in competition the type of asymmetries among competitors the degree to which expenditures are sunk and the number of prizes consider lobbying settings in which firms expend resources in order to influence a policymaker if expenditures take the form of monetary outlays and all firms have the same cost of capital then it is reasonable to think of firms marginal cost of influence as linear but if a firm has a reputational advantage and high costs of capital its lobbying technology may be more reasonably thought of as having convex costs relatively low marginal costs up to a moderate level of influence due to the reputational advantage and relatively high marginal costs at higher levels of influence due to the high costs of capital similarly the lobbying technology of a firm that is relatively unknown and has low costs of capital may be characterized by concave costs lobbying restrictions geographic location or preferential treatment by the policymaker further impact firms lobbying technologies inducing additional nonlinearities and asymmetries among firms in some lobbying settings firms also commit to expenditures conditional on a favorable outcome for example a firm may commit to building factories and creating new jobs if it is granted one of a limited number of manufacturing licenses thus the specification of firms lobbying technologies the type of asymmetries among firms the combination of unconditional and conditional investments and the number of eventual winners may change according to the lobbying setting studied the same is true for other competitions with an all pay feature in a competition for promotions workers often differ in their abilities experience and social skills more than one prize

source versus residence based taxation with international mergers and acquisitions this paper analyses tax competition and tax coordination in a model where capital flows occur in the form of mergers and acquisitions rather than greenfield investment in this framework we show that differences in residence based taxes do not necessarily distort international ownership patterns moreover tax competition yields globally efficient levels of source based corporate income taxes if residence based taxes on capital income are absent in contrast in the presence of residence based taxes on dividends source based corporate income taxes are inefficiently high the widespread view that tax coordination is less urgent if residence based taxes are available may therefore be misguided

competition in interregional taxation the case of western coal markets for many products are dominated by small group of states or countries with a natural advantage in the marketplace because of some initial endowment of resources favorable climate or location the purpose of this paper is to explore how such markets involving a few political jurisdictions interact noncooperatively we examine how such a market might be structured and operate and the extent of monopoly rent that can be extracted in the absence of collusion we answer these questions for an empirically estimated model of western u s coal in which two states montana and wyoming dominate production we demonstrate that in this market the amount of rent that can be extracted is greatly reduced through competition relative to a cartel nevertheless even with two producing states competing against each other significant rents can be captured significant enough to refute the contention that little rent can accrue without a cartel

a general proposition on the design of a neutral business tax abstract a simple and general means of levying a business tax that is neutral in the sense that it does not affect the firm s decisions at the margin is discussed in particular we analyze the effect of a business tax of our design on the investment decision of the firm the well known imputed income and immediate write off methods of levying a neutral business tax are found to be special cases of our general tax design the implication of our results is that a neutral pure profits tax can be levied without the informational difficulties of the imputed income method or the cash flow disadvantages of the immediate write off method

taxing foreign profits with international mergers and acquisitions a large part of border crossing investment takes the form of international mergers and acquisitions in this article we ask how optimal repatriation tax systems look like in a world where investment involves a change of ownership instead of a reallocation of real capital we find that the standard results of international taxation do not carry over to the case of international mergers and acquisitions the deduction system is no longer optimal from a national perspective and the foreign tax credit system fails to ensure global optimality the tax exemption system is optimal if ownership advantage is a public good within the multinational firm however the cross border cash flow tax system dominates the exemption system in terms of optimality properties

viewpoint innovations in the theory and practice of redistribution policy we present a survey of key results from second best optimal redistribution theory and their implications for tax transfer policy the core results include the corlett hague theorem the deaton conditions the production efficiency theorem the atkinson stiglitz theorem and the mirrlees saez characterization of the optimal non linear income tax system these have been augmented in recent years by optimal participation tax rates the implications of involuntary unemployment the use of unconventional instruments such as minimum wages in kind transfer and workfare and the optimal taxation of capital income and bequests l auteur presente un survol des principaux resultats theoriques de la redistribution optimale de second ordre et de leurs implications pour les politiques d imposition et de transferts les resultats fondamentaux incluent le theoreme de corlett hague les conditions de deaton les theoremes d efficacite en production le theoreme d atkinson stiglitz ainsi que la caracterisation du systeme optimal d imposition non lineaire du revenu a la mirrlees saez ces derniers resultats ont ete enrichis au cours des dernieres annees par certains autres portant sur les taux d imposition decoulant des allocations conditionnelles les implications du chomage involontaire l usage d instruments non conventionnels tels que le salaire minimum les transferts en nature le workfare ainsi que l imposition optimale des revenus du capital et des legs ces resultats sont exposes et leurs implications pour les politiques d imposition et de transferts sont discutees

capital income and profit taxation with foreign ownership of firms abstract this paper establishes optimal rules for capital income and profits taxation in the open economy with or without foreign ownership of domestic firms we show that if there are constraints on the feasibility of profits taxation both saving and investment taxes generally enter the optimal tax package if instead profits can be fully taxed then source based investment taxes vanish if domestic firms are in part owned by foreigners then source based investment taxes can be used to shift income away from these to domestic citizens and they may even be used to finance lump sum transfers to domestic residents

why do countries combine the exemption system for the taxation of foreign profits with domestic double taxation relief many european countries exempt foreign profits from domestic corporate taxation at the shareholder level however all corporate profits are taxed and double taxation relief is granted only for domestic corporate taxes this paper attempts to rationalize this tax policy in the presence of double taxation agreements which exempt foreign profits from domestic corporate taxation countries may use shareholder taxes to tax these profits the disadvantage of shareholder taxes is that they create incentives to sell domestic firms to foreigners but double taxation relief for domestic profits may preserve domestic ownership our results imply that national dividend tax policies may be a factor contributing to the empirically observed home bias in investment

simple rules for the optimal taxation of international capital income in this paper we reconcile and extend previous results on the collectively optimal taxation of international investment income the weighted average rule of horst 1980 for example is shown to rest on unattractive assumptions on the set of instruments available ruling out any need for distorting taxes the principal contribution is to establish a new and strikingly simple weighted average rule encompassing the other key result in this area for the general case in which lump sum taxes are unavailable the ability to tax pure profits is perhaps restricted and distorting taxes on both domestic and border crossing capital income are optimally deployed

principles for the provision of public goods from agriculture modeling moorland conservation in scotland this paper is concerned with policies for the supply of public environmental goods from the farm sector in particular we characterize the buying of these goods by the public from farmers using the provider gets principle this principle is well established in oecd countries as we demonstrate results from ecological economic modeling of the conservation of heather moorland in northern scotland using this principle are described this model enables us to identify spatially differentiated ecological targets and to calculate the minimum necessary payments needed to achieve these targets

an analysis of the war of attrition and the all pay auction we study the war of attrition and the all pay auction when players signals are affiliated and symmetrically distributed we a find sufficient conditions for the existence of symmetric monotonic equilibrium bidding strategies and b examine the performance of these auction forms in terms of the expected revenue accruing to the seller under our conditions the war of attrition raises greater expected revenue than all other known sealed bid auction forms journal of economic literature classification numbers d44 d82 1997 academic press

international competition in corporate taxation evidence from the oecd time series despite numerous studies controversy remains about the impact of economic globalization on corporate taxation theoretical models of tax competition generate different predictions about trends in the level of tax burdens and the degree of convergence in tax burdens across countries in this paper we present a purely empirical analysis of the evolution of tax burdens across oecd countries since the 1950s issues of measurement and methodology have contributed to the inconclusive character of studies to date so we begin with an assessment of alternative measures of the burden problems with some commonly used measures of the tax burden are considered and the most plausible measures identified descriptive analysis of these time series reveals no evidence of a competitive race to the bottom in corporate taxation and little evidence of even a harmonization of the tax burden many inferential studies of corporate taxation base their conclusions on cross sectional analysis in contrast we adopt an explicitly time series method to what are essentially time series questions cointegration methodology originally developed to study issues of convergence of living standards is applied and fails to reveal evidence of convergence of tax burdens for the oecd and europe as a whole it does however indicate that there has been some harmonization within smaller groups of countries mainly in northern europe important questions remain about the effectiveness and impact of corporate taxation in an increasingly open and integrated global economy but we find little evidence to support fears that the burden of taxation is being lifted from corporations kenneth stewart and michael webb

captial mobility distributive conflict and international tax coordination basic economic theory identifies a number of efficiency gains that derive from international capital mobility but just as with free trade in goods there is no guarantee that capital mobility makes everyone better off consequently capital mobility may be politically unsustainable even though it enhances efficiency this paper discusses how such a dilemma might arise and suggests that international tax coordination might serve as a way out under some circumstances c 2001 published by elsevier science b v

a symmetric two player all pay contest with correlated information we construct both monotonic and non monotonic symmetric bayesian nash equilibria for a two player all pay contest with binary types and correlated information structures we also employ a class of parametric distributions to illustrate our equilibrium construction explicitly and to derive some comparative statics results

5 information impact and allocation rules in auctions with affiliated private values a laboratory study in affiliated private value auctions each bidder has perfect information regarding his her own value for the object at auction but higher values of the item for one bidder make higher values for other bidders more likely we report on a series of experiments examining three key implications of these auctions i in a first price auction public information about rivals values increases expected revenue ii an english auction increases expected revenue compared to a first price auction and iii a second price auction is isomorphic to an english auction in examining these issues we compare predictions of some ad hoc bidding models with nash equilibrium predictions in the first price auction experiments nash equilibrium bidding theory organizes the data better than either of two ad hoc bidding models public information about others valuations does increase average revenue but the increase in revenue is smaller and less reliable than predicted under risk neutral nash equilibrium bidding lower average revenue might be attributed to risk aversion while the high variability is attributed to a sizable frequency of individual bidding errors relative to the theory bidding theory precisely organizes english auction outcomes after a brief initial learning period the dominant strategy equilibrium does not organize second price auctions nearly as well as market prices persistently exceed predicted prices the difference between english and second price outcomes is attributed to effects of different information flows inherent in the structure of the two institutions on eliminating bidding errors revenue impacts of these two institutions relative to a first price auction are examined in light of observed bidding patterns

common value auctions with discrete private information abstract a first price sealed bid common value auction with finite valued conditionally independent private information is studied we show that the equilibrium in this auction game is characterized by all bidders using a symmetric mixed strategy in which bids are randomized over intervals that are successive and non overlapping for consecutively indexed signals we also show that as the number of bidders grows the winning bid conditional on the true value of the object converges to a non degenerate random variable that is affiliated with the true value therefore only partial information revelation is achieved in the limit

the taxing task of taxing transnationals financial and real investment flexibility tax competition and superior economic information by transnationals both create a rationale for corporate income taxation and limit the effectiveness of such taxation while these factors have led to a variety of transnational tax policies such as deferral double taxation apportionment and trade rules very few of these institutional features have been integrated into tax competition and agency models in this paper i show how the integration of investment flexibility tax competition and agency issues is crucial to our understanding of corporate tax policies

the effects of environmental policy towards agriculture on trade some considerations abstract a growing awareness of environmental problems associated with agricultural production has led to the consideration and in many cases the introduction of more stringent environmental controls across industrialized countries in theory countries that introduce costly environmental regulations should experience a reduction in their international trade competitiveness in polluting commodities in contrast countries that fail to undertake an environmental protection programme presumably increase their export market share in the production of items that damage the environment this viewpoint investigates these potential agricultural trade effects and suggests that they are likely to be quite modest

taxes and international risk sharing abstract we extend a standard model of international risk sharing to include an empirically plausible distortion taxes the tax inclusive theory implies even under full risk sharing a predictable relationship between consumption growth and the consumption and capital income tax rates both within and across countries we find strong empirical evidence in favor of this relationship while idiosyncratic output fluctuations account for substantially more of cross country consumption growth variability than do taxes trends in tax differentials are found to be informative about the dynamic evolution of international risk sharing in particular adjusting for capital taxes reveals a marked improvement in risk sharing over the last three decades that is absent in baseline measures this improvement has been driven by the convergence of average tax rates on capital income across oecd countries toward the united states average capital tax rate

environmental costing for agriculture will it be standard fare in the farm bill of 2000 this paper starts by discussing and estimating the environmental costs of agricultural production the author uses a separate benefit transfer intended to expose methodological issues to construct each cost category of agricultures s external effects this is followed by a simple description of the framework for production decisions that account for environmental costs included are attribution of environmental externalities and measurement of environmental costs finally the author discusses research implications of environmental costing including tqm and environmental policy analyses environmental services and their unit values strategies for measuring environmental values and prognosis for agricultural adders 42 refs 1 fig 1 tab

will social welfare expenditures survive tax competition increasing economic openness creates demands for social welfare programmes designed to cushion the impact of economic changes but may also encourage governments to reduce tax rates to attract mobile economic resources competitive tax reductions could then prevent governments from being able to finance significant welfare spending alternatively economic globalization might improve the ability of governments to afford social welfare programmes and several considerations point in this direction first taxes on internationally mobile activity represent only small fractions of total revenue collections personal income taxes value added taxes and social insurance contributions finance most social welfare spending second international competition need not reduce taxes and indeed over the past 25 years corporate tax collections have remained high as fractions of gdp and total taxes third the vitality of a country s economy largely determines its level of social spending to the extent that incomes rise as a result greater economic openness should strengthen provision of social welfare copyright 2006 oxford university press

taxation of asset income in the presence of a world securities market abstract this paper examines a capm model of world security prices in which governments recognize their ability to influence international security prices via their tax treatment of foreign and domestic investors in this model governments have the incentive to set tax rates such that investors tend to specialize in domestic securities and to restrict net capital flows between countries each country does this to increase the utility of domestic residents taking as given the tax policies of other governments but the net outcome is a reduction in world efficiency and likely a reduction in the utility of all investors

uniqueness and existence of equilibrium in auctions with a reserve price abstract we prove existence and uniqueness of equilibrium for a general class of two player bidding games we apply our results to the first price auction the combination of first and second price auctions the war of attrition the all pay auction as well as combinations of the latter two auction forms we also treat the first price auction without risk neutrality our results deal with the asymmetric affiliated common values environment in the case where signals are independent our results apply to all equilibria when signals are not independent our uniqueness results hold in the class of nondecreasing strategy equilibria journal of economic literature classification number d44

problems with integrating corporate and personal income taxes in an open economy abstract this paper analyzes income tax integration in a small open economy when agents exploit all legal tax arbitrage opportunities the analysis shows that integration does not accomplish the objectives that have been attributed to it instead of eliminating the double taxation of equity income it simply removes the primary taxation of savings done through the corporation the analysis has implications for the choice of a personal tax base and for the design of the corporate tax

must losing taxes on saving be harmful abstract internationalization offers enhanced opportunities for individuals to place savings abroad and evade domestic saving taxation this paper asks whether the concomitant loss of saving taxation necessarily is harmful to this end we construct a model of many symmetric countries in which public goods are financed by taxes on saving and investment there is international cross ownership of firms and countries are assumed to be unable to tax away pure profits countries then face an incentive to impose a rather high investment tax also borne by foreigners in this setting the loss of the saving tax instrument on account of international tax evasion may prevent the overall saving investment tax wedge from becoming too high and hence may be beneficial for moderate preferences for public goods

energy taxation reasons for discriminating in favor of the production sector abstract if a small open economy wishes to restrict it s greenhouse gas emissions it has to decide whether to impose uniform taxes on all polluters or to resort to a discriminatory policy in practice countries tend to impose higher taxes on households and to tax the industrial sector more leniently this paper identifies conditions under which this is efficient it is shown that an efficiency maximizing tax planner discriminates in favor of the production sector if i there are restrictions on the taxation of lump sum income or if ii labor supply exerts market power

information in conflicts abstract we consider two player contests for a prize of common but uncertain value for settings where one player knows the value of the prize while the other only knows its prior distribution we give conditions for when the uninformed agent is ex ante strictly more likely to win the prize than is the informed agent in the special case of a lottery contest equilibrium expenditures are lower under asymmetric information than if either both agents are informed or neither agent is informed

selection bias demographic effects and ability effects in common value auction experiments inexperienced women along with economics and business majors are much more susceptible to the winner s curse as are subjects with lower sat act scores there are strong selection effects in bid function estimates for inexperienced and experienced subjects due to bankruptcies and bidders who have lower earnings returning less frequently as experienced subjects these selection effects are not identified using standard econometric techniques but are identified through experimental treatment effects ignoring these selection effects leads to misleading estimates of learning

can capital income taxes survive in open economies optimal tax theory forecasts that small open economies should not tax capital income yet countries do tax capital income why the inconsistency this paper shows that use of the double taxation convention whereby governments credit taxes paid abroad against domestic taxes helps explain this inconsistency in particular capital income will be taxed if a dominant capital exporter acts as a stackelberg leader when setting its tax policy due to the convention other countries will then tax capital imports making it attractive for the dominant capital exporter to tax capital income without a dominant capital exporter however the model still forecasts no capital income taxes can taxation of capital income survive the increasing integration of world capital markets a number of recent papers suggest not diamond and mirrlees 1971 for example showed that a small open economy would not choose to tax the income generated by the physical capital located within the country this is because production would occur efficiently under an optimal tax system which requires that domestic investments earn the rate of return available on the world capital market in principle a country might still attempt to tax income earned on the savings of its residents however in practice income from savings invested outside the country is virtually impossible for a government to monitor individuals therefore can evade tax on such savings with very little risk as razin and sadka 1989 show such capital flight in theory eliminates any possibility of a tax on savings investors will simply transfer their funds abroad to avoid taxation yet virtually all countries do in fact tax the capital income earned by corporations and individuals located within their borders how can the theoretical forecast of no capital income taxation be reconciled with this simple observation it is difficult to use existing models with any confidence to analyze the implications of changes in capital income tax rates if these same models forecast that countries should never tax capital income

asymmetric all pay auctions with interdependent valuations abstract i show that a unique equilibrium exists in an asymmetric two player all pay auction with a discrete signal structure correlated signals and interdependent valuations the proof is constructive and the construction can be implemented as a computer program and be used to derive comparative statics i also characterize the set of equilibria when a reserve price is introduced

tax evasion in an open economy abstract ignoring tax evasion possibilities a value added and a cash flow income tax have similar behavioral and distributional consequences yet the available means of tax evasion under each can be very different under a vat avoidance occurs through cross border shopping whereas under an income tax it can occur through shifting taxable income abroad given evasion we show that a country would make use of both taxes in order to minimize the efficiency costs of evasion activity relying relatively more on whichever tax is harder to evade we then make use of aggregate danish tax and accounting data from 1992 to measure the amount of evasion that occurred under the two taxes while the estimates of evasion activity are small the figures imply that denmark could reduce the real costs of evasion activity by relying more on value added taxes

externalities in economies with imperfect information and incomplete markets this paper presents a simple general framework for analyzing externalities in economies with incomplete markets and imperfect infonnation by identifying the pecuniary effects of these externalities that net out the paper simplifies the problem of determining when tax interventions are pareto improving the approach indicates that such tax interventions almost always exist and that equilibria in situations of imperfect information are rarely constrained pareto optima it can also lead to simple tests based on readily observable indicators of the efficacy of particular tax policies in situations involving adverse selection signaling moral hazard incomplete contingent claims markets and queue rationing equilibria traditional discussions of externalities have emphasized the distinction between technological externalities in which the action of one individual or firm directly affects the utility or profit ofanother and pecuniary externalities in which one individual s or firm s actions affect another only through effects on prices while the presence of technological externalities imply in general that a competitive equilibrium may not be pareto efficient pecuniary externalities hy themselves are not a source of inefficiency the fact that prices change has of course important consequences there are both distributional and allocational effects but the distribution effects net out gains for example hy firms whose prices increase are precisely offset by losses e g to individuals who must pay higher prices and there are no welfare losses from the allocation effects as long as the price changes involved are small if firms are maximizing profits and individuals are maximizing utility both facing prices that correctly refiect opportunity costs then standard envelope theorem arguments imply that changes in profits or utility induced by changes in allocations resulting from any small change in prices are negligible

commodity tax competition between member states of a federation equilibrium and efficiency we first describe regional market equilibria whereupon consumers of each region allocate their purchases of private goods between domestic and nondomestic ones according to the structure of relative prices taxes and transportation costs next regional optimal tax levels and public good quantities are derived the tax of the other region being held constant fiscal competition arises from the ability of one region in choosing its tax to alter the tax base of the other

tax incentives for business investment a primer for policy makers in developing countries abstract the use of tax incentives is widespread even though the available empirical evidence on the cost effectiveness of such incentives in stimulating investment is highly inconclusive this paper is primarily intended as a primer on the use of tax incentives for policy makers especially those in developing countries it discusses the objectives cost effectiveness and transparency of implementing tax incentives assesses the comparative merits of alternative forms of such incentives and provides a review of the empirical literature its main conclusions are that the justification for the use of tax incentives should be limited to the rectification of market failures and that the preferred form of tax incentives are those that provide for faster recovery of investment costs

internationally mobile firms and tax policy abstract this paper analyses how the government should tax internationally mobile firms the analysis finds that if tax authorities are unable to observe firms true mobility and domestic and foreign profitability are uncorrelated then 1 information rents are acquired by immobile inefficient firms and 2 the optimal policy will stimulate investment in the immobile sector compared to the complete information case another result of the paper is that the optimal allocation is implementable within the framework of a corporate income tax system where mobile firms self select more unfavourable capital allowances than immobile firms

the oecd model tax treaty tax competition and two way capital flows model tax treaties do not require tax rate coordination but do require that either credits or exemptions be applied to repatriated earnings this contradicts recent models with a single capital exporter where deductions are most efficient i incorporate the fact that capital flows are typically bilateral with symmetric countries credits by both is the unique and efficient treaty equilibrium this equilibrium weakly dominates the nontreaty equilibrium with asymmetric countries the treaty need not offer improvements without tax harmonization with harmonization it is always possible to reach efficient capital allocations while increasing both countries welfares only if neither uses deductions

international capital tax evasion and the foreign tax credit puzzle in this paper we examine how the presence of international tax evasion affects the choice of a foreign tax credit by a capital exporting region since the credit raises the opportunity cost of concealing foreign source income it can be employed to discourage evasion activity international tax evasion can thus help to rationalize the adoption of a tax credit in excess of a deduction equivalent rate jel classification h21 h26 evasion fiscale pour le capital international et le probleme du credit d impot pour le fardeau fiscal a l etranger ce memoire examine comment la presence d evasion fiscale pour le capital international affecte le choix du credit d impot pour le fardeau fiscal a l etranger par une region qui exporte du capital puisque le credit d impot accroit le cout d opportunite du camouflage de la source etrangere de revenus c est une technique qui peut etre employee pour decourager l evasion fiscale voila qui peut expliquer qu on adopte un credit d impot qui est plus genereux que ce qui constituerait la deduction dans un systeme ou le fardeau fiscal a l etranger est simplement deduit du revenu imposable

the lack of strategic sustainability orientation in german water companies abstract water supply and distribution companies wsc are dealing with one of the most crucial natural resources that is why the german national sustainability strategy highlights water as one of the priority fields of action in germany wsc show characteristics of natural monopoly the distinct separation between public institutions and the private sector as well as municipal operators being responsible for practicing special functions is characteristic for the german water economy from an evolutionary perspective it is of interest how german wsc implement sustainability strategically therefore strategic concepts and tools facing sustainability e g iso 14001 reporting and balanced scorecard etc were analysed and evaluated in the context of the water industry using literature studies and web analysis the relevant data of 110 german wsc was put together a cross sectional design was used in order to find patterns possible gaps are highlighted and ongoing steps to foster sustainability are stressed this study points out a sustainable management is just marginally implemented the results obviously show that there are differences between large companies and smes facing sustainability requirements wsc having own regenerative power generation and an integrative thinking of farming and water supply are part of good practice

all pay contests this paper studies a class of games all pay contests which capture general asymmetries and sunk investments inherent in scenarios such as lobbying competition for market power labor market tournaments and r d races players compete for one of several identical prizes by choosing a score conditional on winning or losing it is weakly better to do so with a lower score this formulation allows for differing production technologies costs of capital prior investments attitudes toward risk and conditional and unconditional investments among others i provide a closed form formula for players equilibrium payoffs and analyze player participation a special case of contests is multiprize complete information all pay auctions

designing tax policy in federalist economies an overview abstract the emerging economic federations of the european union russia and south africa along with the established federations in australia canada and the united states confront the task of designing the institutions for federal fiscal policy this paper reviews the literature on the design of tax policy in federalist economies we conclude that taxation by lower level governments can lead to significant economic inefficiencies and inequities the usual assignment view of federalis recommends central government policies for example resident based taxation or grants in aid to correct these failures these recommendations assume that the central government will act as a benevolent social planner the political economy view of federalism suggests that this assumption is in error and that additional federalist institutions must be considered alternative legislative structures and constitutional rules are considered

taxation corporate financial policy and the cost of capital the cost of capital plays an important role in the allocation of resources among competing uses in a decentralized market system the purpose of this paper is to organize and present what is known and what is hypothesized about the effects of taxation on the incentive to invest via the cost of capital taking full account of important issues that arise independently from the question of taxation included in the analysis is a discussion of empirical findings about the interaction of inflation and taxation in influencing the incentive to invest and a treatment of taxation and uncertainty this abstract was borrowed from another version of this item

reconsidering agri environmental policy permitted by the uruguay round agreement agri environmental policies are increasingly being used to redress the balance between jointly produced agricultural and environmental outputs and are permitted by the uruguay round ur agreement with the general provision that they not distort trade in this paper we argue that any market consequences of efficient welfare enhancing agri environmental policies should not be considered trade distorting to consider them so is inconsistent with economic efficiency and with ecological integrity social cost benefit analysis cba is a more appropriate test and guide of trade consistency for agri environmental policies and using trade effects as the test may not enhance social welfare moreover specific provisions in the ur agreement restricting payments under agri environmental policies to opportunity costs are not warranted on economic efficiency grounds and consign the environment to a status subsidiary to agricultural output

tax competition and tax coordination in an optimum income tax model abstract the paper uses the self selection approach of stiglitz 1982 to study tax competition and tax coordination in a many country optimum income tax model in the model the government can impose a non linear tax schedule on wage income and a source based tax on mobile capital in an uncoordinated equilibrium it turns out that countries can use the capital tax instrument to weaken the self selection constraint the paper presents examples where positive and negative capital taxes are optimal from a single country perspective if the production function is weakly separable between labor and capital it can be shown that the optimal capital tax is zero the paper also shows that contrary to the standard tax competition model the uncoordinated equilibrium can be efficient if the wealth distribution the endowments with capital among individuals is egalitarian a coordination of capital taxes does not affect welfare for non egalitarian wealth distributions a coordinated increase in capital taxes can raise or lower welfare depending on the redistributive impact of a higher capital tax

all pay auctions with affiliated binary signals abstract we analyze all pay auctions with affiliated values and binary signals we analyze the unique symmetric equilibrium with any number of bidders and show that the bidders earn positive rents only if the equilibrium is monotone we also characterize the symmetric equilibrium of the closely related two player war of attrition we compare expected revenues across these formats all pay auctions result in lower expected rents to the bidders than standard auctions but they also induce inefficient allocations in some models with affiliated private values with two bidders the effect on rent extraction dominates and the all pay auctions outperform standard auctions in terms of expected revenue with many bidders standard auctions may result in higher expected revenue the war of attrition outperforms the standard auctions in terms of revenue but its ranking relative to all pay auctions is ambiguous

foreign direct investment under oligopoly profit shifting or profit capturing abstract in this paper a model of taxation of foreign source corporate income is developed when the output market is not perfectly competitive profit shifting policies similar to those in the new trade literature are also present in the case of foreign direct investment fdi there are however important differences to the new trade theory since in case of fdi i corporate taxation and double taxation relief are the policy instruments rather than output or revenue taxes ii countries are not symmetric in the sense that the host country has the first right to tax the multinational s profit and the home country reacts by providing double taxation relief and iii output but not corporate taxation is specific to imperfectly competitive industries it is argued that a variants of a tax credit are analogous to export subsidies b when the home country operates a tax credit system the host country s incentive to capture the multinational s profit is bounded under imperfect competition c when the host country offers a tax holiday the home country should imitate this policy and d in the presence of perfect competitive industries double taxation relief is a good instrument to target imperfectly competitive industries

information sharing and tax competition among governments abstract the residence based principle has been proposed as a second best measure to the full international coordination of capital tax policies this system requires that tax authorities have full information about the foreign investments of their residents however the degree of information transmission among governments can be considered as a strategic variable we show that under some features of the tax system there will not be any information sharing while there are institutional arrangements under which governments may transmit partial information for strategic purposes we also show that full information sharing is not necessarily a pareto optimum

on capital income tax policies under uncertainty this paper investigates corporate income and dividend taxation in a multi country world where production is subject to country specific productivity shocks singlecountry non cooperative tax policy is shown to imply a tax on foreign source dividends and a subsidy to domestic source dividends the optimal corporate tax may be negative if international portfolios are little diversified at the outset finally each country in a coordinating region should subsidize rather than tax domestic citizen s investment in equity in partner countries 1998 elsevier science b v all rights reserved

the equity efficiency trade off in environmental policy evidence from stated preferences the design of environmental policy raises several equity issues in particular the distribution of benefits and costs at the same time it has often been argued that there is a trade off in environmental policy between equity and efficiency which brings these issues firmly to the attention of environmental economics in this paper we use a simple choice experiment to elicit individual preferences over equity efficiency trade offs in the context of two environmental problems local air pollution and global climate change we find that equity matters to people as much as efficiency does in the design and delivery of environmental policy

strategic trade policy through the tax system if conventional instruments of strategic trade policy are unavailable the system of foreign profit taxation and transfer price guidelines may serve as surrogate policy instruments in this paper i consider a model where firms from two countries compete with each other on a market in a third country both firms have affiliates in the third country where part of the production takes place i analyse optimal policy choices of the firms residence countries aiming at strategically manipulating the competitiveness of their firms i show that first countries prefer the tax exemption system over the tax credit system if there is no intra firm trade second if the headquarters provide inputs for production in the affiliate countries prefer the tax exemption system if the transfer price for these inputs is close to the headquarters variable cost and if the residence country s tax rate is high however if transfer prices are high and the residence country s tax rate is low i show that the tax credit system is an optimal tax policy choice for both countries from a policy perspective the view that the tax exemption system is generally the best policy response if domestic firms competitiveness is a policy goal has to be qualified

tax competition under the threat of capital flight abstract a tax competition model has been constructed in this paper we have found that tax distortions can result from the mere threat of capital flight and the ensuing tax competition even though inefficient allocation of the world capital resources may no longer be a problem

why is capital so immobile internationally possible explanations and implications for capital income taxation the evidence on international capital immobility is extensive including the lack of international portfolio diversification real interest differentials across countries and the high correlation between domestic savings and investment the authors develop a model with asymmetric information between countries that helps rationalize all the above observations and then examine the implications of this model for optimal domestic tax policy without asymmetric information past work showed that small open economies should not impose corporate income taxes with asymmetric information the optimal policy instead involves government subsidies to capital imports some omitted factors that argue against subsidizing capital imports are explored briefly copyright 1996 by american economic association

tax competition in imperfectly competitive markets abstract the literature on strategic trade policy has shown that in imperfectly competitive markets governments have an incentive to subsidize exports of their own firms yet the consequence of the departure from laissez faire is a wasteful subsidy race in contrast this paper shows that even in imperfectly competitive markets there is a strong tendency for laissez faire to prevail the driving force is the firms willingness to exploit tax or subsidy differentials by relocating production a small tax differential induces firms to change their place of production the change in market structure has a negligible effect on the oligopoly equilibrium but a non negligible impact on government revenues when tax policy is non discriminatory governments gain lose by attracting all firms when production is taxed subsidized hence laissez faire is the only equilibrium since from the point of view of the two producing countries laissez faire nondiscrimination pareto dominates the intervention equilibrium discrimination nondiscrimination is a simple device to result in a mutual beneficial outcome

the scope for taxation and public expenditure in an open economy in this survey of some central issues of tax and expenditure policy in an open economy we consider the implications for policy of free although not necessarily perfect international mobility of commodities capital and labour we examine the issues both from a positive and a normative point of view trying to identify both the incidence and welfare effects of international mobility one general conclusion is that tax distortions may increase in magnitude in comparison with a closed economy but they may also increase in kind as when otherwise neutral taxes become distortionary because of factor mobility

cross border investing with tax arbitrage the case of german dividend tax credits german dividends typically carry a tax credit which makes the dividend worth 42 86 more to a taxable german shareholder than to a tax exempt or foreign shareholder this results in a penalty for foreign investors who buy and hold german dividend paying stocks i document that as a result of the credit the ex day drop exceeds the dividend by more than one half of the tax credit and show that futures and option prices embed more than one half of the tax credit the existence of the credit creates opportunities for cross border tax arbitrage in which foreign holders of german stock transfer the dividend to german shareholders and implies that it is tax efficient for foreign investors to hold derivatives rather than investing directly in german stocks the empirical findings are consistent with costly tax arbitrage activity by german investors who face tax risk due to antiarbitrage rules since dividend tax credits exist in many other countries the findings are potentially of broad interest

taxation of investment and savings in a world economy the equilibrium of capital and equilibrium market prices are derived for a world economy with a unified securities market mobile capital no uncertainty and varying tax rates on different sources of income in each country the paper then characterizes optimal tax rates for a small country in this setting focusing on the peculiar incentives created when the before tax rate of return differs among securities due to differences in their typical tax treatment copyright 1986 by american economic association

international profit shifting within multinationals a multi country perspective abstract we model the opportunities and incentives generated by international tax differences for international profit shifting by multinationals the model considers not only profit shifting arising from international tax differences between affiliates and parent companies but also from tax differences between affiliates in different host countries our model yields the prediction that a multinational s profit shifting in a country depends on a weighted average of international tax rate differences between all countries where the multinational is active using a unique dataset containing detailed firm level information on the parent companies and subsidiaries of european multinationals and information about the international tax system we test our model and empirically examine the extent of intra european profit shifting by european multinationals on average we find a semi elasticity of reported profits with respect to the top statutory tax rate of 1 3 while shifting costs are estimated to be 0 6 of the tax base international profit shifting leads to a substantial redistribution of national corporate tax revenues many european nations appear to gain revenues from profit shifting by multinationals largely at the expense of germany

tariff jumping foreign investment and capital taxation abstract this paper reconsiders the welfare effects of tariff jumping direct investment if mobile capital is subjected to taxation in contrast to the conventional wisdom the receiving country may in this case gain from the incremental inflow of capital as this diverts tax revenues from the rest of the world in the case of perfect capital mobility this possibility becomes a certainty our argument provides one rationale for a small country to levy a distorting tariff in a second best world in which capital taxes already exist

fiscal competition and the pattern of public spending much attention has been given to the impact of fiscal competition on the level of public expenditure but relatively little to the impact on its composition using a broadly familiar and reasonably rich model of fiscal competition in the presence of mobile capital this paper establishes a systematic bias in public spending patterns starting from the non cooperative equilibrium and holding tax rates constant welfare would be improved by a coordinated reduction in the provision of local public inputs and a corresponding increase in the public provision of local public goods benefiting immobile consumers c 1997 elsevier science s a