Data and code for: Dynamic Capital Tax Competition under the Source Principle

Principal Investigator(s): View help for Principal Investigator(s) Till Gross, Carleton University; Paul Klein, Stockholm University; Miltiadis Makris, University of Kent

Version: View help for Version V1

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Project Citation:

Gross, Till, Klein, Paul, and Makris, Miltiadis. Data and code for: Dynamic Capital Tax Competition under the Source Principle. Nashville, TN: American Economic Association [publisher], 2022. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2022-06-24. https://doi.org/10.3886/E124901V1

Project Description

Summary: We explore the short- and long-run implications of tax competition between jurisdictions, where governments can only tax capital at source. We do this in the context of a neoclassical growth model under commitment and capital mobility. We provide a new theoretical perspective on the dynamic capital-tax externalities that emerge in this model. Numerically, we show that the net capital-tax externality is positive in the short run but converges to zero in the long run. We also find that non-cooperative source-based capital taxes are initially positive and slowly decline towards zero. Coordinated capital tax rates are higher than non-cooperative ones in the short run, lower in the medium run, and the same in the long run. This stands in contrast to common beliefs and results from static and two-period models, which have informed policy debates in the European Union and elsewhere.

Scope of Project

Subject Terms: Capital taxation; Tax competition; Optimal dynamic fiscal policy

JEL Classification:
      E62 Fiscal Policy
      F21 International Investment; Long-term Capital Movements
      H21 Taxation and Subsidies: Efficiency; Optimal Taxation

Geographic Coverage: Europe

Time Period(s): 1985 – 2020

Universe: EU countries and UK

Data Type(s): aggregate data; program source code

Collection Notes: Main data produced by using program source code and calibrating the model on European aggregate data in years 1985 and 1992.

Methodology

Data Source: Data from OECD and IMF

Unit(s) of Observation: Year, country

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Published Versions

V1 [2022-06-24]

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