Enhanced Cooperation in an Asymmetric Model of Tax Competition

This paper analyzes enhanced cooperation agreements in corporate taxation in a three country tax competition model where countries differ in size. We characterize equilibrium tax rates and the optimal tax responses due to the formation of an enhanced cooperation agreement. Conditions for strategic complementarity or strategic substitutability of tax rates are crucial for the welfare effects of enhanced cooperation. Simulations show that enhanced cooperation is unlikely to be feasible for small countries. When enhanced cooperation is feasible, it may hamper global harmonization. Only when countries are of similar size is global harmonization a feasible outcome.tax coordination, asymmetry, enhanced cooperation agreements, strategic tax response

Tax Policy in a Model of Search with Training

This paper develops a model of search on the labour market with training. The model reveals how the tax system can restore the social optimum if the Hosio s condition is not satisfied in the private equilibrium. Furthermore, the effects are explored of a second-best reform from average to marginal taxes when a given amount of public revenue has to be raised. We find that (i) a marginal wage tax is less distortionary to raise revenue than is an average tax per job, provided that training is not distorted initially; (ii) this conclusion may reverse in the presence of training distortions; (iii) marginal wage taxes are less distortionary in economies characterized by commitment in wage bargaining, such as the European labour market. Hence, tax reforms that reduce the average tax per job and raise the marginal wage tax, such as an EITC or a negative income tax, are more attractive in Europe than in the US.

What a difference does it make? Understanding the empirical literature on taxation and international capital flows

This study explains the variation in empirical estimates in the literature on the elasticity of foreign direct investment with respect to company tax levels. To that end, the meta analysis of De Mooij and Ederveen (2003) is extended by considering an alternative classification of the literature and by including new studies that have recently become available. Specific attention is paid to two new dimensions: the spatial and the time dimension of the underlying studies.Foreign direct investment, corporate taxation, meta analysis, international capital flows,de Mooij,Ederveen

Pigou Meets Mirrlees: On the Irrelevance of Tax Distortions for the Second-Best Pigouvian Tax

This paper extends the Mirrlees (1971) model of optimal income redistribution with optimal corrective taxes to internalize consumption externalities. It is demonstrated that the optimal second-best tax on an externality-generating good should not be corrected for the marginal cost of public funds. The reason is that the marginal cost of public funds equals unity in the optimal tax system, since marginal distortions of taxation are equal to marginal distributional gains. The Pigouvian tax needs to be modified, however, if polluting commodities or environmental quality are more complementary to leisure than non-polluting commodities are.marginal cost of public funds, optimal environmental taxation, optimal redistribution, externalities

Taxation and Foreign Direct Investment: A Synthesis of Empirical Research

This paper reviews the empirical literature on the impact of company taxes on the allocation of foreign direct investment. We make the outcomes of 25 empirical studies comparable by computing the tax rate elasticity under a uniform definition. The mean value of the tax rate elasticity in the literature is around -3.3, i.e. a 1%-point reduction in the host-country tax rate raises foreign direct investment in that country by 3.3%. There exists substantial variation across studies, however. By performing a meta analysis, the paper aims to explain this variation by the differences in characteristics of the underlying studies. Systematic differences between studies are found with respect to the type of foreign capital data used, and the type of tax rates adopted. We find no systematic differences in the responsiveness of investors from tax credit countries and tax exemption countries.

Turkish Delight – Does Turkey’s accession to the EU bring economic benefits?

We explore the economic implications of the possible Turkish accession to the European Union. We focus on three main changes associated with Turkish membership: (i) accession to the internal European Market; (ii) institutional reforms in Turkey triggered by EU-membership; and (iii) migration in response to the free movement of workers. Overall, the macroeconomic implications for EU countries are small but positive. European exports increase by around 20 percent. Turkey experiences larger economic gains than the EU: consumption per capita is estimated to rise by about 4 percent as a result of accession to the internal market and free movement of labour. If Turkey would succeed in reforming its domestic institutions in response to EU-membership, consumption per capita in Turkey could raise by an additional 9 percent. These benefits would spill over to the EU.Turkey, regional economic integration, general equilibrium model, gravity equations, institutional reform, migration

Corporate tax policy, entrepreneurship and incorporation in the EU

In Europe, declining corporate tax rates have come along with rising tax-to-GDP ratios. This paper explores to what extent income shifting from the personal to the corporate tax base can explain these diverging developments. A panel of European data on firm births and legal form of business was used to analyze income shifting via increased entrepreneurship and incorporation. The results suggest that lower corporate taxes exert an ambiguous effect on entrepreneurship. The effect on incorporation is significant and large. It implies that the revenue effects of lower corporate tax rates - possibly induced by tax competition -- partly show up in lower personal tax revenues rather than lower corporate tax revenues. Simulations suggest that between 10% and 17% of corporate tax revenue can be attributed to income shifting. Income shifting is found to have raised the corporate tax-to-GDP ratio by some 0.2%-points since the early 1990s.Corporate tax, Personal tax, Entrepreneurship, Incorporation, Income shifting, de Mooij, Nicodème

Corporate Tax Policy, Entrepreneurship and Incorporation in the EU

In Europe, declining corporate tax rates have come along with rising tax-to-GDP ratios. This paper explores to what extent income shifting from the personal to the corporate tax base can explain these diverging developments. We exploit a panel of European data on firm births and legal form of business to analyze income shifting via increased entrepreneurship and incorporation. The results suggest that lower corporate taxes exert an ambiguous effect on entrepreneurship. The effect on incorporation is significant and large. It implies that the revenue effects of lower corporate tax rates – possibly induced by tax competition -- partly show up in lower personal tax revenues rather than lower corporate tax revenues. Simulations suggest that between 10% and 17% of corporate tax revenue can be attributed to income shifting. Income shifting is found to have raised the corporate tax-to-GDP ratio by some 0.2%-points since the early 1990s.corporate tax, personal tax, entrepreneurship, incorporation, income shifting

A generalized non-Gaussian consistency relation for single field inflation

We show that a perturbed inflationary spacetime, driven by a canonical single scalar field, is invariant under a special class of coordinate transformations together with a field reparametrization of the curvature perturbation in co-moving gauge. This transformation may be used to derive the squeezed limit of the 3-point correlation function of the co-moving curvature perturbations valid in the case that these do not freeze after horizon crossing. This leads to a generalized version of Maldacena's non-Gaussian consistency relation in the sense that the bispectrum squeezed limit is completely determined by spacetime diffeomorphisms. Just as in the case of the standard consistency relation, this result may be understood as the consequence of how long-wavelength modes modulate those of shorter wavelengths. This relation allows one to derive the well known violation to the consistency relation encountered in ultra slow-roll, where curvature perturbations grow exponentially after horizon crossing.Comment: 16 pages, v3: matches published version (JCAP

Characterising exo-ringsystems around fast-rotating stars using the Rossiter-McLaughlin effect

Planetary rings produce a distinct shape distortion in transit lightcurves. However, to accurately model such lightcurves the observations need to cover the entire transit, especially ingress and egress, as well as an out-of-transit baseline. Such observations can be challenging for long period planets, where the transits may last for over a day. Planetary rings will also impact the shape of absorption lines in the stellar spectrum, as the planet and rings cover different parts of the rotating star (the Rossiter-McLaughlin effect). These line-profile distortions depend on the size, structure, opacity, obliquity and sky projected angle of the ring system. For slow rotating stars, this mainly impacts the amplitude of the induced velocity shift, however, for fast rotating stars the large velocity gradient across the star allows the line distortion to be resolved, enabling direct determination of the ring parameters. We demonstrate that by modeling these distortions we can recover ring system parameters (sky-projected angle, obliquity and size) using only a small part of the transit. Substructure in the rings, e.g. gaps, can be recovered if the width of the features ($\delta W$) relative to the size of the star is similar to the intrinsic velocity resolution (set by the width of the local stellar profile, $\gamma$) relative to the stellar rotation velocity ($v$ sin$i$, i.e. $\delta W / R_* \gtrsim v$sin$i$/$\gamma$). This opens up a new way to study the ring systems around planets with long orbital periods, where observations of the full transit, covering the ingress and egress, are not always feasible.Comment: Accepted for publication in MNRA