Konferenzbeitrag
Why Countries Compete in Ad Valorem Instead of Unit Capital Taxes
This paper contributes to resolving the puzzle that in practice most countries use ad valorem (corporate income) taxation, while a large part of the tax competition literature views business taxes as unit (wealth) taxation. We point to the dual role that corporate taxation plays in attracting mobile capital, on the one hand, and in absorbing economic rents, on the other hand. In contrast to the previous literature, we show (i) that detrimental tax competition may be less severe in a system of ad valorem taxes than in a system of unit taxes and (ii) that ad valorem taxation may be the equilibrium outcome in a decentralized world where countries decide themselves on the tax system. Interestingly, the decentralized choice of the ad valorem system may be a prisoner's dilemma since the countries' welfare may be higher if they choose unit taxes.
- Language
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Englisch
- Bibliographic citation
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Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2012: Neue Wege und Herausforderungen für den Arbeitsmarkt des 21. Jahrhunderts - Session: Tax competition ; No. B02-V2
- Classification
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Wirtschaft
Taxation and Subsidies: Efficiency; Optimal Taxation
Business Taxes and Subsidies including sales and value-added (VAT)
Intergovernmental Relations; Federalism; Secession
- Event
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Geistige Schöpfung
- (who)
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Runkel, Marco
Hoffmann, Magnus
- Event
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Veröffentlichung
- (when)
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2012
- Handle
- Last update
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10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Konferenzbeitrag
Associated
- Runkel, Marco
- Hoffmann, Magnus
Time of origin
- 2012
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