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Globalization and Income Taxes

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Globalization and Income Taxes" Competitive pressure on some capital income tax rates reinforces a four-way tradeoff in domestic income taxation. To maintain competitiveness, governments have to cut some tax rates on capital income down to "international standards." If these cuts lead to a de-alignment of different rates on capital income, domestic allocation becomes more inefficient, all else being equal. Cutting all tax rates on capital income to a uniform low level, while maintaining high and progressive tax rates on labour incomes, avoids this inefficiency, but sacrifices comprehensive income taxation, that is, joint and equal taxation of capital and labour incomes. Finally, reducing all income tax rates to international standards, including top rates on labour income, implies a strong significant reduction in the progressiveness of labour income taxation (and/or significant revenue losses). "Global Markets, National Tax Systems, and Domestic Politics: Rebalancing Efficiency and Equity in Open States' Income Taxation" by Steffen Ganghof is published by the Max Planck Institute for the Study of Societies.

 

By Max Planck Institute for the Study of Societies , Australia, Denmark, Finland, Germany, New Zealand, Norway and Sweden.

Taxation Policy Resource.