Register  |  Login  |  Inquiries  |  Sitemap |  
Advanced Search
Journal of Economic Integration 2018 December;33(4) :722-772.
DOI: https://doi.org/10.11130/jei.2018.33.4.722
Optimal Capital Taxation Rates and Tax Competition in Open Economy
Séverine Menguy 
Université Paris Descartes, France
Corresponding Author: Séverine Menguy ,Tel: 00 33 1 46 68 94 84, Email: severine.menguy@orange.fr
Copyright ©2018 Journal of Economic Integration
ABSTRACT
The model presented in this paper provides accurate theoretical results regarding optimal taxation rates and fiscal externalities in an open economy. We show that for both capital-importing and capital-exporting countries, capital taxation rates should increase with country size approximated by its capital stock. In parallel, for the smallest countries, the fiscal weight could be very high and strongly relies on the labor production factor. It is also demonstrated that the optimal capital taxation rate increases with the relative preference of the representative consumer for private consumption, in contrast to public consumption, as well as with the capital share in the production function. Furthermore, the presented model shows that the slope of the tax reaction function is positive as soon as the preference of the representative consumer for private goods consumption is sufficiently high.

JEL Classification
H21: Efficiency; Optimal Taxation
H25: Business Taxes and Subsidies
H87: International Fiscal Issues; International Public Goods
Keywords: Tax competition | Capital importing country | Capital exporting country | Optimal capital taxation rate | Fiscal externalities
Editorial Office
Center for Economic Integration, Sejong Institution, Sejong University, 209, Neungdong-Ro, Gwangjin-Gu,
Seoul, 05006, Korea
TEL : +82-2-3408-3338    FAX : +82-2-3408-3338   E-mail : jei@sejong.ac.kr
Browse Articles |  Current Issue |  For Authors and Reviewers |  About
Copyright© by Center for Economic Integration. All right reserved.