Social Sciences
4 years ago

Global tax competition leads to higher revenue with lower capital taxes.

Journal of International Economics
Why do most countries set high tax rates on capital?
Nicolas Marceau, Steeve Mongrain, John D. Wilson

Paper Summary

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Countries set high tax rates on capital because they compete to attract mobile capital, which can move easily between countries. Even though some countries try to tax mobile capital lightly to attract it, overall, the global tax revenue is higher when countries do not give preferential treatment to mobile capital. This means that even though some countries have low tax rates to attract capital, the total tax revenue collected globally is higher when all countries tax capital equally.