Harry Huizinga and Søren Bo Nielsen
Harry Huizinga: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Søren Bo Nielsen: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Abstract: Internationalization offers enhanced opportunities for individuals to place savings abroad and evade domestic saving taxation. This paper asks whether the concomi- tant loss of saving taxation necessarily is harmful. To this end we construct a model of many symmetric countries in which public goods are financed by taxes on saving and investment. There is international cross-ownership of firms, and countries are assumed to be unable to tax away pure profits. Countries then face an incentive to impose a rather high investment tax also borne by foreigners. In this setting, the loss of the saving tax instrument on account of international tax evasion may prevent the overall saving-investment tax wedge from becoming too high, and hence may be beneficial for moderate preferences for public goods. A world with 'high-spending' governments, in contrast, is made worse off by the loss of saving taxes,and hence stands to gain from international cooperation to restore saving taxation.
29 pages, May 5, 2004
Full text files
Questions (including download problems) about the papers in this series should be directed to Lene Hald ()
Report other problems with accessing this service to Sune Karlsson ().
This page generated on 2022-03-04 14:16:00.