Distributional consequences of capital tax coordination

digital

Article

Magazine

RIVISTA INTERNAZIONALE DI SCIENZE SOCIALI

Fascicle

RIVISTA INTERNAZIONALE DI SCIENZE SOCIALI - 2012 - 4

Title

Distributional consequences of capital tax coordination

Author

Martin Zagler

Publisher

Vita e Pensiero

Format

Article |

Pdf

Online from

04-2012

Issn

0035-676X (print) | 1827-7918 (digital)

€ 6.00

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Description

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.