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Distributional consequences of capital tax coordination

digital Distributional consequences of capital tax coordination
Article
journal RIVISTA INTERNAZIONALE DI SCIENZE SOCIALI
issue RIVISTA INTERNAZIONALE DI SCIENZE SOCIALI - 2012 - 4
title Distributional consequences of capital tax coordination
author
publisher Vita e Pensiero
format Article | Pdf
online since 04-2012
issn 0035-676X (print) | 1827-7918 (digital)
€ 6.00

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Tax coordination is an important issue for Europe. This paper has two ambitions. First, we review the economic literature on tax coordination. Second, we argue that the taxation of capital is not an issue of efficiency, but instead an issue of equity. In particular, capital tax coordination can alter the vertical distribution of income between the production factors capital and labour. Capital is in perfectly elastic supply in a small open economy. Therefore the tax incidence falls to the immobile factor, labour. By contrast, capital is in inelastic supply at the international level, and therefore the capital tax incidence falls completely on capital, without welfare losses of taxation.