Incentives and Information Exchange in International Taxation

The exchange of taxpayer-specific information between national tax authorities has recently emerged as a key and controversial topic in international tax policy discussions, most notably with the OECD's harmful tax practices project and the EU's savings tax initiative. This paper analyzes the effects of information exchange and withholding taxes, recognizing that countries which agree to exchange information do not forfeit the ability to levy withholding taxes, and also focusing in particular on the effects of innovative revenue-sharing arrangements. Amongst the findings are that: (i) the transfer of withholding tax receipts to the residence country, as planned in the European Union, has no effect on equilibrium tax rates, but acts purely as a lump-sum transfer; (ii) in contrast, allocating some of the revenue from information exchange to the source country—counter to usual practice (though no less so than the EU agreement)—would have adverse strategic effects on total revenue; (iii) nevertheless, any withholding tax regime is Pareto dominated by information exchange combined with appropriate revenue sharing; and, in particular, (iv) sharing of the additional revenues raised from information provided, while efficiency-reducing, could be in the interests of large countries as a means of persuading small countries to provide that information voluntarily. JEL Code: H77, H87, F42     

Exchange-of-Information Clauses in International Tax Treaties

This paper examines bilateral double taxation treaties, with an emphasis on information exchange among tax authorities. A major objective is to understand which countries are more likely to sign a tax-relief treaty and when information-exchange clauses will be added to a treaty. A simple model with two asymmetric countries and repeated interactions among governments is used. The paper shows that no information exchange clause may be added to a tax treaty when there is a reciprocity requirement, when there is a high cost of negotiation, when there is a cost of providing information, or with one-way capital flows. It is also shown that an information clause increases the gains from a tax relief treaty, but may make it less sustainable.     

Residence-Based Capital Taxation in a Small Open Economy: Why Information is Voluntarily Exchanged and Why it is Not

The issue of capital tax competition is viewed to be unproblematic if residence-based capital-taxation exists. However, the sustainability of residence-based capital taxation depends on the exchange of information about foreign financial investments between tax authorities. This paper analyzes the incentives of tax authorities to voluntarily provide information. We show that voluntary information exchange is an equilibrium in a standard small-country model of tax competition, whereas it may not be an equilibrium when the size of the financial sector has a positive impact on the wage structure of an economy.     

Exemption vs. Credit Method in International Double Taxation Treaties

This paper examines the choice of international double taxation relief methods by two small countries that mutually exchange foreign direct investment. At the first stage, each country chooses between the exemption and the credit method (as prescribed by the OECD model treaty) and at the second stage, each country sets nationally optimal non-discriminatory capital tax rates. It is shown that in the subgame perfect equilibrium both countries choose the exemption method. Mutual application of the exemption method is also shown to yield the highest welfare for each country. While the tax export effect generally induces both countries to choose inefficiently high tax rates, this effect is weakest when both countries exempt foreign earned profits from domestic taxation.     

Optimal International Taxation and Growth Rate Convergence: Tax Competition vs. Coordination

Optimal international taxation and its implications for convergence in long run income growth rates are analyzed in the context of an endogenously growing world economy with perfect capital mobility. Under tax competition (i) the residence principle will maximize national welfare; (ii) the optimal long run tax rate on capital incomes from various sources will be zero in all countries; and (iii) long term per capita income growth rates will be equalized across countries. Under tax coordination, (i) becomes irrelevant while (ii) and (iii) will continue to hold. In other words, optimal tax policies are growth-equalizing with and without international policy coordination. This revised version was published online in July 2006 with corrections to the Cover Date.     

Tax Competition and International Public Goods

A well known result in the tax competition literature is that tax rates are set too low in the Nash equilibrium to finance an efficient level of public consumption goods. In this model we introduce international spillovers in public goods provision and show that such spillovers reduce, and in the limiting case of perfect spillovers, eliminate tax competition. There is, however, always underprovision of the public good in equilibrium, since larger spillovers increase the problem of free riding. In an extension to the model, we demonstrate that congestion costs may result in overprovision of the public good.     

Sharing the Spoils: Taxing International Human Capital Flows

This paper argues that cross-border human capital flows from developing countries to developed countries over the next half-century will demand a new set of policy responses from developing countries. The paper examines the forces that are making immigration policies more skill-focused, the effect of both flows (emigration) and stocks (diasporas) on the source countries, and the range of taxation instruments available to source countries to manage the consequences of those flows. This paper emphasizes the example of India, a large source country for human capital flows, and the United States, an important destination for these human capital flows and an example of how a country can tax its citizens abroad. In combination, these examples point to the significant advantage to developing countries of potential tax schemes for managing the flows and stocks of citizens who reside abroad. Finally, this paper concludes with a research agenda for the many questions raised by the prospect of large flows of skilled workers and the policy alternatives, including tax instruments, available to source countries.     

Capital Mobility and Source-Based Taxation of Capital Income in Small Open Economies

This paper examines the taxation of capital income in a small open economy that faces a highly elastic supply of internationally mobile capital and increasing tax competition. The analysis considers a wide variety of additional factors that affect the determination of capital income taxation policy, including the desire to tax economic rents earned by foreign and domestic firms, the desire to take advantage of any treasury transfer effects, the role played by transfer pricing and other financial accounting manipulations by foreign multinationals, the need for a backstop to the personal income tax and various political concerns. The paper evaluates several potential income and consumption-based tax reforms in this context. JEL Code: H21, H25, H87     

Some Equity and Efficiency Considerations of International Tax Competition

The paper uses a dynamic 2-country equilibrium model with imperfections in the labour market calibrated for the US and EU economy to investigate dynamic efficiency and equity aspects of international tax competition. We focus on tax policy where governments can only decide on the levels of corporate and labour taxes, given a constant share of government consumption and transfers in GDP and a constant VAT rate. We find that the welfare effect of a tax shift from capital to labour depends heavily on the distortionary nature of labour taxes. In contrast to existing results we find substantial positive international spillover effects of corporate tax reduction in one country, with long term gains outweighing short term losses. Results are very different, however, if one goes beyond the representative agent framework. According to our results, a tax switch is most likely not Pareto improving since net wages tend to decline in both regions even in the long run.     

Optimal Income Taxation and the Ability Distribution: Implications for Migration Equilibria

As recently argued by Diamond (1998), one of the key factors explaining the progressivity of an optimal non-linear income tax is the distribution of productivity among workers. Migration is one source of changes in the productivity distribution. How changes in the populations ability distribution affect optimal income tax schedules has received little attention. Changing the distribution generally affects both the objective function and the government budget constraint. We first consider the comparative statics of the fraction of highly-skilled workers with maximin and maximax welfare functions (so that only the second effect is present) and a quasi-linear utility function. We also present some results for a utilitarian social welfare function.We then study the interaction between mobility and redistributive taxation. We consider mobility by either the skilled or unskilled population under majority voting where governments take the population as fixed. If individuals choose to relocate independently, having identical ability distributions is always a stable equilibrium when the unskilled are the mobile group. However, this is not always the case when the skilled are mobile. If groups of individuals can choose where to locate, having identical ability distributions across regions is only an equilibrium when the mobile type has an overall majority.     

国际税收仲裁:理论依据、现实进展及展望

依国际仲裁法及条约法原理,税收协定争议具有可仲裁性,国际税收仲裁有其国际法依据。近年来,国际税收仲裁在制度构建、立法实践与实际运用方面都取得了较大的突破与发展。随着国际税收实践的发展,国际税收仲裁制度终将走向成熟,并为各国所普遍接受与实践。但由于国际税收实践的复杂性,国际税收仲裁的发展将是一个长期、复杂的过程。     

证券流转税:现状分析、国际趋势与改革思路

我国目前的证券税制以证券交易印花税为主体税种。从长远来看,我国应逐步完善证券流转税制,实行证券交易税和印花税兼征制度。改革我国的证券流转税,在证券交易环节用证券交易税代替印花税,不能仅限于更名,而应有实质性的改变。     

Institutional Differences and International Private Debt Markets: A Test Using Mandatory IFRS Adoption

Institutional differences between countries result in additional information risks between borrowers and lenders in cross‐border private loans. This study examines the effect of these information risks on the structure of optimal debt contracts in international (cross‐border) versus domestic private debt markets. Using mandatory IFRS adoption as an indicator for institutional changes that reduced differences between countries, I compare attributes of international versus domestic loans before and after IFRS adoption. I find that, in the pre‐IFRS period, international loans are associated with a higher credit spread, a weaker relationship between the bank and the borrower, a more diffuse loan syndicate, and less reliance on accounting‐based covenants than domestic loans. These results are consistent with incremental information risks in international debt markets that make it more costly for lenders to screen and monitor borrower credit quality, resulting in a more arm's‐length relationship between borrowers and lenders. Many of these associations attenuate after IFRS adoption, suggesting that the pre‐IFRS differences in contract terms are driven by incremental information risks related to institutional differences between countries. My findings imply that incremental information risks result in a different optimal contract in international debt contracts compared to domestic debt contracts.     

交易透明度与信息揭示制度：国际趋势与启示

由于经济文化环境、交易制度、市场结构，技术模式和投资者分布等方面的差异，不同交易所在交易信息揭示的种类，数量和程度方面有所区别。本文首先总结了采取指令驱动的主要交易所的交易信息揭示制度和市场透明度，在比基础上分析了交易所交易信息揭示制度变革与市场透明度的发展趋势．希望能对我国证券市场交易信息揭示制度的发展提供一点有益的借鉴和启示。     

信息不对称条件下银行业市场结构与市场竞争研究综述

将信息不对称理论纳入银行业市场竞争模型是当前跨经济学与金融学两个领域的热点问题。本文从理清产业组织理论中银行业市场结构与竞争和现代金融学中银行业信息不对称研究的发展脉络出发,对信息不对称与银行信息垄断和市场进入壁垒、信息不对称条件下银行的市场竞争行为等文献进行综述,评估银行业市场竞争程度的测量方法和实证分析结果。希望此综述对未来进一步的研究有所启示。     

Sharing Demand Information in a Value Chain: Implications for Pricing and Profitability

While it is known that information exchange (IE) in a value chain improves resource coordination, scant attention has been paid to two issues. The first issue is the effect of relative bargaining strengths of the parties on whether and how IE will be implemented. The second issue is whether a resource-based costing system is adequate to motivate the implementation of information exchange. In this paper, we model a value chain consisting of a manufacturer and a retailer, where the retailer gets (private) demand information that has the potential of improving the manufacturers resource decisions. In this model, it is always beneficial for the value chain to implement IE. We show that in a monopsony or in a bilateral monopoly when the retailer has sufficient bargaining power, IE can be implemented if and only if the wholesale price compensates him for the loss of the information rent that he would get without IE. Using this model as the benchmark, we also examine other settings where the retailers have less bargaining power due to competition or size. In such settings, even though the retailers are better informed, the manufacturer can implement the IE regime costlessly and appropriate the information rent partially or fully. In effect, the manufacturer benefits both by improved resource coordination and by reduced payment for information rent. In all these settings, we find the retailer will not be motivated to adopt IE solely by a resource-based costing and pricing system.     

推动房价上涨的货币因素研究——基于美国、日本、中国泡沫积聚时期的实证比较分析

本文从理论上探究了货币量与房价之间的双向联系,分析了不同渠道下两者之间的动态加速器机制。从货币结构的视角选用了准货币作为考察货币与房价关系的主要变量进行论证。在此基础上,采用协整VAR模型的框架在货币、资产价格、宏观经济之间建立多变量关系,同时针对美国、日本、中国三个国家的典型房价泡沫积聚时期的数据进行实证比较分析。结果表明三个国家中货币量与房价之间都存在长期均衡关系,巨额货币存量推动房价上涨的力量比较强大而且明显。在资产泡沫积聚时期,推动房价上涨的实体因素不足,最重要的还是货币因素推动。因此,要控制房价过快增长,需要中央银行调整货币政策框架及通胀目标,关注资产价格变化并有效控制货币量。     

Efficient Tax Competition with Factor Mobility and Trade: A Note

This note shows that residence- and source-based taxes on capital income are not sufficient to sustain an efficient Nash equilibrium when several goods are internationally traded, apart from two special cases. With several traded commodities, domestic fiscal policies affect foreign welfare not only through changes in the world interest rate but also through changes in the equilibrium relative prices of traded commodities. In order to guarantee the existence of an efficient Nash equilibrium in the general case, additional tax instruments are required. In particular, destination-based taxes on traded commodities are needed to enable the government to control the relative commodity prices faced by domestic consumers. In addition, in order to shield domestic producers from changes in world prices, the government must levy either origin-based commodity taxes or taxes on the immobile factors.     

税收增速减缓与地方税收竞争——基于省际面板数据的考察

本文通过理论分析明确了地方政府税收竞争对税收增长的影响机制。以此为基础,利用我国省际面板数据所做的实证研究显示,地方政府的税收竞争强度每提高0.01,全部税收、中央税收征收额和地方税收征收额分别下降0.64、0.71、0.60个百分点。为了进一步缓解地方政府经济增长激励与维护税法严肃性之间的矛盾,中央政府应逐步提高财产税收入所占的比重,将地方政府的税收竞争主要限制在财产税范围内。     

The Pitfalls of International Integration: A Comment on the Bush Proposal and its Aftermath

In January 2003, the Bush Administration proposed a new system for taxing corporate dividends, under which domestic shareholders in U.S. corporations would not be taxed on dividends they received, provided the corporation distributed these dividends out of after-tax earnings (the Bush Proposal). The Bush Proposal was introduced in Congress on February 27, 2003. Ultimately, however, Congress balked at enacting full-fledged dividend exemption. Instead, in the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) as enacted on May 28, 2003, a lower rate of 15% was adopted for dividends paid by domestic and certain foreign corporations,¹ and the capital gains rate was likewise reduced to 15%. Significantly and in stark contrast to the original Bush proposal, under JGTRRA the lower rate for dividends and capital gains does not depend on any tax being paid at the corporate level.This comment will focus primarily on the international aspects of both the Bush Proposal and JGTRRA. I will not lay out the proposal or the law in any detail. Instead, I will ask whether either the Bush Proposal or JGTRRA make sense from an economic efficiency perspective when the international implications are taken into account. I will leave to others the question of whether either the Bush Proposal or JGTRRA are sensible ways to stimulate the economy (for discussion of the effect of the 2001 tax cuts see Shapiro and Slemrod, 2001, 2002). I will also omit any discussion of the distributive effects of either the Bush Proposal or JGTRRA, which have been extensively discussed elsewhere (e.g., Tax Policy Center, 2003; Burman, Gale and Orszag, 2003).