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Tax competition and politics: double-edged incentives revisited

By Ben Lockwood and Miltiadis Makris


We re-examine, from a political economy perspective, the standard view that higher capital mobility results in lower capital taxes - a view, in fact, that is not confirmed by the available empirical evidence. We show that when a small economy is opened to capital mobility, the change of incidence of a tax on capital - from capital owners to owners of the immobile factor - may interact in such a way with political decision-making so as to cause a rise in the equilibrium tax. This can happen whether or not the fixed factor (labour) can be taxed

Topics: HG
Publisher: University of Warwick. Centre for the Study of Globalisation and Regionalisation
Year: 2003
OAI identifier:

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