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International Tax Competition: There is No Need for Cooperation in Information Sharing
Author(s) -
Makris Miltiadis
Publication year - 2003
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00402
Subject(s) - economics , microeconomics , competition (biology) , set (abstract data type) , information sharing , tax competition , information asymmetry , general equilibrium theory , zero (linguistics) , capital (architecture) , information exchange , public economics , indirect tax , tax reform , computer science , history , ecology , telecommunications , linguistics , philosophy , archaeology , world wide web , biology , programming language
Abstract A model is investigated in which small open economies choose the degree of information exchange among tax authorities and an unrestricted set of capital income taxes. The author shows that cooperation in information sharing does not matter in equilibrium outcomes. This comes in striking contrast to existing results and the common belief among policy practitioners. The reason for this result is that if the set of distortionary taxes is unrestricted then, depending on the characteristics of the economy, either information sharing becomes redundant or the non‐cooperative equilibrium is characterized by zero information exchange and overprovision of information.